The US-Iran war, which started with U.S. and Israeli strikes on February 28, 2026, is now affecting credit markets. The closure of the Strait of Hormuz has driven oil prices sharply higher, fueling inflation concerns.
This has tightened credit conditions, with rising Treasury yields and higher mortgage rates. Private credit default rates are also climbing, raising fears of further economic disruption.
Prediction markets now show reduced odds of Federal Reserve rate cuts in 2026, as sustained high oil prices and inflation make monetary easing less likely. Analysts warn that the ongoing conflict could delay any policy pivot.