With military tensions between the United States and Iran rising again, volatility in global financial markets could expand, according to an outlook. As uncertainty over the Strait of Hormuz fuels international oil prices and U.S. Government Bonds yields climb quickly, risk appetite could weaken for the time being, the analysis said.
Park Sang-hyun, an iM Securities researcher, said in a report on the 14th that "the Strait of Hormuz has effectively returned to a prior phase of tension," adding that "a renewed clash between the United States and Iran is a burdensome event for the global economy and financial markets."
Park assessed in particular that U.S. President Donald Trump's stance toward Iran has grown more hard-line. Park said Trump is signaling stronger military action—moving away from limited responses with negotiations in mind to steps such as eliminating Iran's leadership and striking the Natanz nuclear facility—and that this shift is further heightening Middle East geopolitical risk.
Park also cited as a factor stoking market unease Trump's remark that, in exchange for protecting the safety of U.S. troops, 20% of civilian cargo passing through the strait could be collected as an "assured safe passage fee." Park said, "It is uncertain whether the levy will materialize," but added, "If implemented, it would have an effect similar to a tariff and would inevitably add to inflationary pressure."
Reflecting these concerns, international oil prices (WTI) closed at $78.14 per barrel, up 9.42% from the previous session. Park analyzed that, with the likelihood high that U.S.-Iran military clashes will continue for the time being and concerns over a blockade of the Strait of Hormuz persisting, there remains room for further gains in oil prices. Park added that Russia's ban on diesel exports is also a factor amplifying instability in the global crude market.
The bond market is also growing tense. The U.S. 10-year Government Bonds yield closed at 4.6216% on the 13th, up 16 basis points just this month and nearing the May high of 4.663%. Park said, "Given the current mood, the U.S. 10-year Government Bonds yield is likely to surpass its previous high," and predicted, "The surge in oil prices could serve as a catalyst further strengthening the Federal Reserve's hawkish stance."
However, Park also assessed that these negatives are not immediately at a level that would lead to a global recession or financial crisis. Park said, "Multiple negatives are emerging at the same time right now, but they are not enough to trigger a global economic downturn or spark another crisis," while adding, "It is necessary to watch whether the U.S.-Iran military clashes escalate."
Park added, "A squall of negatives is falling, so for now it is time to wait for the squall to pass," and said, "As always, President Trump's position can change depending on how the situation evolves, and signs of easing negatives can likely be confirmed in the downward stabilization of U.S. Government Bonds yields."