Long-term government borrowing costs climbed to their highest level in nearly two decades as the Iran war<\/a> showed little sign of a resolution and investors feared persistent inflation<\/a>.<\/p>\n The 30-year Treasury yield jumped to 5.32%, registering its highest level since 2007, before dropping slightly lower. The surge in borrowing costs threatens to raise mortgages and credit card rates, since long-term bond yields help set<\/a> interest payments for various consumer loans.<\/p>\n Major stock indexes fell in response to rising yields. The Dow Jones Industrial Average ticked down 15 points, or 0.03%, while the S&P 500 dropped 0.4%. The tech-heavy Nasdaq declined 1%.<\/p>\n Since bonds pay a given investor a fixed amount each year, the specter of inflation risks higher consumer prices that would eat away at those annual payouts. As a result, investors tend to sell off bonds if they fear a prolonged bout of inflation.<\/p>\n In this case, a global oil shock<\/a> has pushed up energy prices which in turn has trickled into other costs, such as groceries<\/a>.<\/p>\n Global oil prices ticked above $91 a barrel on Tuesday, up nearly 30% since the outbreak of the Iran war in late February. The average price of a gallon of gas is $4.06, putting it well above an average of $2.98 before the war, AAA<\/a> data showed.<\/p>\n Iran\u2019s near-closure of the Strait of Hormuz choked off a trade route responsible for about 20% of global oil supply. A U.S. blockade of Iranian ships deepened the crude shortage. On-again, off-again negotiations have failed to restore tanker tariff in the strait.<\/p>\n Stock photo of a for sale sign in front of a home.<\/span><\/span><\/span><\/p>\n Steve Heap\/Adobe Stock<\/span><\/p>\n<\/div>\n<\/figcaption><\/figure>\n<\/div>\n<\/div>\n<\/div>\n An average of about 13 ships crossed the strait each day last week, oil data company Kpler said in a post on X<\/a>, down from more than 100 ships per day before the recent conflict.<\/p>\n Inflation, in turn, has stayed elevated. Prices rose 3.4% in July compared to a year earlier, marking a slight cooldown from the prior month, federal government data last week showed.<\/p>\n Still, inflation stands more than a percentage point higher than the Federal Reserve’s target rate of 2%.<\/p>\n The Fed, meanwhile, has opted against<\/a> imposing interest rate hikes in response to the oil-driven rise in prices. The central bank could hike rates in an effort to cool off prices, but the move risks an economic slowdown that may pinch hiring.<\/p>\n Fed Chair Kevin Warsh, who took the helm of the central bank this summer, has repeatedly vowed to dial back inflation.<\/p>\n “The committee remains resolute — you\u2019ve heard this before — that we will deliver price stability,” Warsh told reporters in Washington, D.C., last month.<\/p>\n Investors, however, appear skeptical of the central bank’s willingness to urgently increase rates.<\/p>\n Odds of a quarter-point rate hike at the Fed’s next meeting in September stand at 34%, according to the CME Group’s FedWatch Tool<\/a>, a measure of market sentiment.<\/p>\n<\/div>\n![\"bank](\"https:\/\/i.abcnewsfe.com\/a\/40c45c33-babc-4728-96b4-4497901b6ed5\/home-1-as-gmh-260818_1787064348249_hpEmbed_3x2.jpg?w=375 "\\"bank")
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