Global bonds freeze as U.S. prepares ’greatest financial offensive’ against Iran

Global bond markets have come to a standstill, awaiting the U.S.'s announcement of its most extensive financial offensive against Iran. Fixed-income desks have remained idle for a second consecutive week, following a recent sell-off triggered by rising geopolitical tensions. The U.S. has threatened Iran with a barrage of new economic sanctions, specifically targeting nations and trade partners engaged in business with Tehran.

In response, Iran has vowed to cease all Gulf energy exports if the pressure persists. U.S. Treasury Secretary Scott Bessent is set to detail the new punitive measures in a press conference later in the day. Brent crude futures have dipped slightly, but investors remain apprehensive due to restricted tanker traffic through the Strait of Hormuz and concerns about persistent cost-push inflation.

Despite Secretary Bessent's efforts to boost bond markets through buyback operations, traders remain unconvinced, as these measures only shift the maturity profile of government debt and do not reduce overall supply. With gross U.S. national debt hitting a record $40 trillion and primary dealers grappling with heavy corporate issuance, investors are demanding substantial fiscal consolidation before lowering long-term borrowing costs.

The Federal Reserve's upcoming decision on interest rates during the Jackson Hole Economic Policy Symposium could provide further clarity for global debt markets.