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

US government borrowing costs climbed to their highest level since 2007 after the Federal Reserve left interest rates unchanged amid renewed military action against Iran. The 30-year Treasury yield jumped 14 basis points to nearly 5.24 percent, reflecting investor concerns that the central bank is moving too slowly to contain price pressures tied to the conflict.

Fed Chair Kevin Warsh said the institution would stick to its 2 percent inflation target without compromise. The decision to hold rates steady for the fifth straight meeting came as Washington and Tehran exchanged fire again following the collapse of a brief ceasefire. US Central Command reported striking dozens of Iranian Revolutionary Guard targets in a two-hour barrage after Iran hit an American base in Jordan.

The economic fallout showed up immediately in financial markets. The S&P 500 dropped 1.5 percent, the Dow Jones industrial average fell 2.2 percent, and the Nasdaq declined 1.7 percent. Oil prices climbed higher once more, feeding into broader inflation that had only recently cooled to an annual rate of 3.5 percent in June.

Energy companies are recording sharp gains from the same price surge. Shell reported adjusted second-quarter earnings of 9.84 billion dollars, well above analyst forecasts and the strongest quarterly result for the firm in four years. The company cited higher realized prices and strong trading performance as it kept its share buyback program at 3 billion dollars. Net debt fell to 41.75 billion dollars while cash flow from operations reached 21.4 billion dollars.

The contrast is stark for American households facing elevated costs for fuel, food, and credit. Long-term government borrowing expenses are now at levels not seen in nearly two decades, adding pressure to an already strained federal budget. Economists noted that the Fed appears to be counting on higher bond yields to do some of the work in tightening financial conditions rather than raising rates itself.

Strikes on Iranian targets followed President Trump’s pledge to respond forcefully after the Jordan attack. The latest round came after US forces, working with Saudi Arabia, hit Iran-backed groups in Iraq. The pattern of escalation has raised questions about how long the conflict can remain contained and what further strain it will place on domestic finances.

Markets are pricing in sustained volatility as long as military operations continue. The Fed’s reluctance to adjust policy quickly has left investors to adjust expectations on their own, pushing yields higher and increasing the cost of everything from mortgages to corporate debt. For now, the economic signals point to Americans absorbing the direct costs of the confrontation through higher prices and heavier borrowing burdens.