Australia’s 10-year government bond yield has climbed back above 5%, edging toward multi‑year highs as investors scale back expectations for a swift resolution to the Middle East conflict following US President Trump’s latest address.
Oil prices gained after Trump said Washington’s “core strategic objectives” in Iran were close to being achieved, but he also warned that the US would maintain military pressure for another two to three weeks and offered no clear timetable for ending the conflict. He added that the US does not rely on the Strait of Hormuz, and suggested the waterway would reopen naturally once tensions abate. However, ongoing uncertainty over the strait has kept energy markets volatile.
Economists cautioned that higher energy prices are likely to push inflation higher, prompting downgrades to growth forecasts and intensifying expectations of further rate hikes by the Reserve Bank of Australia as stagflation risks mount. Futures markets now imply about a 70% probability of a 25-basis-point increase in the RBA’s 4.1% cash rate in May, with rates projected to peak at around 4.6% by September.