Oil surges, Treasury yields hit 19-year high as US-Iran strikes resume

US government borrowing costs climbed to their highest levels since 2007 after the Federal Reserve decided to keep its benchmark interest rate unchanged for the fifth straight meeting. The yield on the 30-year Treasury bond rose 14 basis points to nearly 5.24 percent, reflecting investor concerns over persistent inflation pressures tied to the ongoing conflict with Iran.

Fed Chair Kevin Warsh stated that the central bank would not waver from its 2 percent inflation target. He noted that some Americans had come to view the bank as having an implicit higher target after a prolonged period of elevated prices. Data showed annual inflation at 3.5 percent in June, down from prior peaks but still above the goal, with the brief ceasefire between Washington and Tehran having given way to renewed exchanges of fire.

The decision to hold rates between 3.5 and 3.75 percent came as oil prices rose again. Renewed US strikes on Iranian Revolutionary Guard targets followed an Iranian attack on American forces in Jordan. Markets reacted immediately, with the S&P 500 falling 1.5 percent, the Dow Jones industrial average dropping 2.2 percent, and the Nasdaq declining 1.7 percent.

Energy companies have recorded gains amid the volatility. Shell reported adjusted earnings of 9.84 billion dollars for the second quarter, exceeding analyst forecasts and marking the company's strongest quarterly result since 2022. The firm cited higher realized prices for oil and gas, along with strong operational performance and trading results. Cash flow from operations reached 21.4 billion dollars, while net debt fell to 41.75 billion dollars. Shell plans to maintain its share buyback program at 3 billion dollars for the next quarter.

Chief Executive Wael Sawan described volatility as the new normal and pointed to the company's ability to benefit from elevated commodity prices while controlling internal factors such as operations and trading. The results follow a pattern seen in prior supply disruptions, where producers capture higher margins even as broader economic costs rise.

Higher borrowing costs and equity declines illustrate how the combination of military engagement and monetary restraint transmits through financial markets. Bond yields serve as a direct signal of expectations for future inflation and fiscal demands. Energy sector gains show uneven distribution of effects, with producers insulated while households and non-energy businesses face elevated input costs. The Fed's repeated pauses in rate adjustments have left markets to price in the risks through Treasury yields rather than through immediate policy shifts.