Trump's Iran War Stirs Bond Market Inflation Fears — SkimNews
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- Global government debt has risen fivefold since 2000, with US federal debt alone doubling to more than $40 trillion over the past decade as neither Democrats nor Republicans have shown interest in curbing deficits.
- AI hyperscalers have burned through their cash reserves and begun borrowing to fund massive data-centre buildouts, adding fresh demand on top of sovereign issuance in an already credit-hungry market.
- Iran is refusing to negotiate and instead is trying to establish facts on the ground by disrupting tanker traffic in the Strait of Hormuz through intermittent drone strikes, from which Washington cannot easily disengage.
- Oil supply from the Gulf still falls short of global demand despite US tanker escorts, pushing prices steadily higher and driving up costs for diesel and fertilizers — much of the world's fertilizer supply comes from the Gulf.
- Bond investors are demanding higher interest rates now to compensate for expected inflation rather than waiting for next week's inflation report, with yields likely to climb further if the standoff continues.
- Trump remains trapped between inflation-driven recession risk and the political cost of failure — relentless US bombing has devastated Iran's economy but shown no discernible impact on regime resolve, and he fears few things more than being called a loser.
Why it matters: If the Iran war keeps oil supply tight through autumn, the bond market's inflation hedge becomes self-fulfilling: higher yields on a debt stock now above $40 trillion in the US alone mean higher borrowing costs across the economy, while farmers already face diesel and Gulf-fertilizer cost spikes that directly feed into food prices.
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