FX.co ★ Australia 10Y Yield Hits 6-Week High

Australia’s 10-year government bond yield rose above 4.9%, reaching a six-week high, as the deepening conflict in the Middle East pushed oil prices higher and intensified inflation concerns. The confrontation between the US and Iran has extended from military assets to critical infrastructure, and shipping through the Strait of Hormuz has largely come to a standstill. The US has reinstated its blockade of Iranian ports, while Tehran has stepped up attacks on vessels near the Gulf, heightening fears that disruptions to energy supplies could reignite global inflation and complicate the policy outlook for major central banks. In Australia, expectations for further policy tightening remain modest but are likely to come under pressure from higher fuel costs. Markets are currently pricing in roughly a 70% probability of one final rate hike by December, while some analysts anticipate the Reserve Bank will start cutting rates next year. Traders are now focused on upcoming labour market data and flash PMI readings later this week for additional insight into the strength of the Australian economy.