Global financial markets are experiencing heightened tension due to the potential for military conflict between the U.S. and Iran, coupled with the possibility of further interest rate hikes in the United States. While U.S. Treasury yields and the value of the dollar have risen, major stock markets have shown weakness.
According to the International Financial Center, the yield on the U.S. 10-year Treasury note rose to 5.00% on September 18, an increase of 3 basis points from the previous week. Concerns over inflation due to rising oil prices and the Federal Reserve's potential for additional rate hikes have driven bond yields higher.
The dollar has also strengthened, with the dollar index, which measures the dollar against six major currencies, rising 1.11% to 100.22 over the week. During the same period, the euro and yen fell by 0.97% and 2.08%, respectively. The won-dollar exchange rate increased by 3.05% to 1386.4 won.
International oil prices have surpassed $100 per barrel, with Brent crude reaching $103.37. President Donald Trump stated that the U.S. is at a decision point regarding its response to Iran, warning of potential military action while also leaving the door open for dialogue with the Iranian president.
Iran has proposed conditions for a ceasefire, including the end of hostilities on all fronts and the release of frozen funds and the lifting of maritime blockades. The Iranian parliament has claimed that if these conditions are not met, it will continue to block the Strait of Hormuz. Iran has also threatened to attack U.S. forces and citizens in the region if the U.S. launches further attacks. The uncertainty surrounding the Strait of Hormuz, a key oil transport route, is expected to keep oil price volatility high for the foreseeable future.
Major stock markets have shown weakness due to concerns over oil price instability and prolonged high interest rates. The S&P 500 index in the U.S. fell by 0.08% over the week, while the European Stoxx 600 index dropped by 0.57%. The domestic KOSPI index also declined by 0.23% during the same period.
Central banks in major economies are facing increasing challenges. While raising interest rates is necessary to control inflation, rising long-term Treasury yields could increase the interest burden on both the government and the private sector. The International Financial Center noted that in response to high Treasury yields, it may be more reasonable for governments to pursue fiscal tightening rather than relying solely on central bank bond purchases.
* This article has been translated by AI.
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