US Treasury Rout Deepens as Iran War Fuels Inflation and Higher Borrowing Costs

U.S. Treasury yields have climbed sharply, with the benchmark 10-year note trading above 4.5 percent as investors absorb sticky inflation, stronger-than-expected economic growth and elevated energy prices linked to the ongoing Iran war. The sustained rise in borrowing costs is increasing interest expenses across the economy and poses direct risks to housing demand and consumer spending; policymakers and market participants warn the trend could, if it persists, tip the economy toward recession.

Analysts cited in reporting say the moves are testing Washington’s tolerance for materially higher borrowing costs and complicating fiscal calculations for the federal government. Separately, the Financial Times has estimated that the Iran conflict could add billions of dollars in interest payments to U.S. debt, amplifying the fiscal impact of higher long-term yields.

Readers should note that the United Nations’ updated global economic growth forecast for 2026 — reported on May 20, 2026 — is the most recent comprehensive assessment of the global outlook and is directly relevant to how prolonged higher yields and energy-price shocks might affect the broader economy.