March 4, 2026: Inflation Anxiety Reawakens

Following the United States’ and Israel’s attack on Iran, investor attention has focused on the potential impact on oil prices and, by extension, broader energy costs. While oil prices have risen roughly 15% since last Friday’s close, the increase has been more muted than the surge that followed Russia’s invasion of Ukraine more than four years ago.

Two factors help explain this relatively restrained response to date. First, oil prices had already risen about 20% year to date prior to last weekend, reflecting investors’ expectations of geopolitical conflict and potential supply disruptions. Second, global economies remain well supplied, supported by substantial oil reserves. The International Energy Agency notes, for example, that its member countries collectively hold more than one billion barrels of oil in emergency stockpiles.*

Despite the moderate rise in oil prices, investor concern appears to be growing that broader price pressures may reaccelerate. This renewed inflation anxiety is evident in higher U.S. Treasury yields since the outbreak of hostilities. Typically, Treasury yields decline as risk appetite diminishes. That 10-year Treasury yields have instead moved higher suggests investors may be reassessing risks in U.S. bonds, driven not only by rising energy prices but also by the prospect of increased deficit‑financed federal spending to support prolonged military operations.

These concerns have intensified just as respondents to the ISM Manufacturing Survey reported that input prices are rising at the fastest pace since 2022. Taken together, these developments suggest that inflation worries—and upward pressure on bond yields—may persist for some time.

Weekly Market Update: March 4, 2026

* John Ainger. “IEA Ready to Stabilize Global Oil Market Amid Iran War.” Bloomberg. Mar. 3, 2026.