Written by: Oihyun Kim
Translated by: Saoirse, Foresight News
TL;DR
Driven by the Iran situation, oil prices surge, reigniting market inflation concerns, and U.S. Treasury yields hit their largest single-day increase since October.
Yellen warns that the Federal Reserve is now “more inclined to hold steady,” while Dimon calls inflation a potential “party pooper” (something that spoils the fun).
Safe-haven capital inflows push Bitcoin up 5.7%, but sustained high interest rates could pose a challenge to the cryptocurrency’s bullish outlook.
Wall Street is sounding the alarm on inflation. From the bond market to corporate executives, increasing signals suggest that U.S. and Israel’s actions against Iran could reignite inflationary pressures that the Fed has been trying to suppress for years—this could significantly impact interest rates, risk assets, and the crypto market.
The key question now is: Will the oil shock triggered by the Iran situation become the catalyst that disrupts Wall Street’s long-held expectation of rate cuts?
Bonds React First
The bond market quickly prices in this threat. On Monday, the 10-year U.S. Treasury yield jumped 10 basis points to 4.03%, the largest single-day increase since October last year. Meanwhile, oil shipments through the Strait of Hormuz are nearly completely halted, causing oil prices to soar over 6%.
Expectations for rate cuts have also cooled significantly. Traders now generally expect the Fed to delay its first cut until September at the earliest, and the expectation of a third rate cut in 2026 has almost disappeared. Just a few weeks ago, markets were still quite optimistic about a loosening cycle.
The signals from the bond market are clear: inflation risks are resurfacing, and the Fed may be constrained.
Yellen and Dimon Issue Warnings
On Monday, two of the most influential figures in U.S. finance further reinforced this signal.
Former Treasury Secretary Janet Yellen warned that the Iran conflict makes the Fed “more inclined to hold steady,” and policymakers will be less willing to cut rates. She stated at the S&P Global TPM26 Shipping Conference that U.S. inflation is currently around 3%, well above the Fed’s 2% target, with tariffs from the Trump era contributing about 0.5 percentage points.
Her deeper concern is psychological. She said the Fed must be wary of the market forming the view: “Inflation has indeed fallen to 3%, but the Fed doesn’t really want to push it back down to 2%.” Once this expectation becomes entrenched, high inflation could become a long-term fixture—something the central bank desperately wants to avoid.
JPMorgan Chase CEO Jamie Dimon also expressed similar views, warning that inflation could become a “party pooper” (something that spoils the fun) for the U.S. economy, undermining the overall mood. He acknowledged that short-term conflicts have limited impact on inflation, but if the conflict persists longer, the situation could change dramatically.
What Inflation Means for Markets
If inflation proves more stubborn than expected, its effects will ripple across all asset classes.
For stocks, prolonged high interest rates will compress valuations, especially impacting growth and tech stocks that are sensitive to discount rates. Monday’s market already reflected this: the S&P 500 fell over 1 intraday before barely closing flat; defensive sectors like energy and defense gained, while airlines plunged.
For cryptocurrencies, the situation is more complex.
On Monday, despite bond sell-offs, Bitcoin rose 5.7% to $69,424. Many interpret this as safe-haven capital flowing into hard assets amid geopolitical uncertainty and inflation fears. Gold prices breaking above $5,300 also support this logic.
However, sustained high interest rates will challenge the bullish case for cryptocurrencies. The 2022 bear market proved that when liquidity tightens and the Fed turns hawkish, digital assets undergo sharp revaluations. If rate cut expectations continue to fade, the risk appetite in crypto markets could face pressure in the coming months.
Not Everyone Is Bearish
Of course, Wall Street does not agree on an “apocalyptic scenario.”
Morgan Stanley strategists led by Mike Wilson say that as long as oil prices don’t continue to surge sharply, the Middle East conflict is unlikely to derail their optimism about U.S. stocks. JPMorgan’s equity team views the escalation as a potential buying opportunity, believing the fundamentals remain positive.
Senior strategist Louis Navellier is more optimistic, predicting that once Iran’s leadership becomes more pro-Western and oil exports recover, the military actions will “eliminate major uncertainties” and trigger a rebound.
The Atlantic Council also takes a cautious stance, noting that global energy infrastructure remains intact, and pre-conflict supply fundamentals are healthy. The real variable is how long the conflict lasts, not the strikes themselves.
The Key Question: How Long Will It Last?
All forecasts ultimately hinge on one variable: how long the Strait of Hormuz remains effectively blocked.
If resolved within a few days, the inflation impact will likely be limited to a short-term spike in energy prices—painful but manageable.
But if the disruption lasts for weeks, it could combine with seasonal gasoline changes, persistent core inflation, and tariff-driven price pressures, creating a “pressure cocktail” that forces the Fed to maintain tight policies into 2026.
For crypto investors, this means geopolitical events and on-chain indicators are equally important. Bitcoin may rise today due to safe-haven flows, but if Yellen and Dimon are correct about inflation’s trajectory, the crypto market could face a tougher road before any improvement.
