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May 5, 2026 – 03:49

(Bloomberg) — Bond yields rose after the US and Iran exchanged fire, jolting a four-week-old ceasefire, heightening Middle East tensions and stoking inflation concerns. The dollar strengthened.

Yields on the 10-year New Zealand government bond rose three basis points to 4.69% as higher crude oil prices stoke inflation, which trims returns. Yields on similar maturity debt in Australia climbed above 5%, hours before a rate decision by the Reserve Bank of Australia. Economists overwhelmingly expect the central bank to raise the cash rate.

The moves in Asia followed a similar pattern in the US session, where Treasuries fell across the curve, pushing 30-year yields to 5%, the highest level since July. Traders boosted wagers that the Federal Reserve will have to reverse course and raise interest rates to curb inflation following a surge in oil prices. There will be no cash trading in Treasuries during Asian hours due to a holiday in Japan.

Brent, the global crude oil benchmark held most of its gains from the previous session, edging lower and trading just under $114 a barrel as escalating tensions around the Strait of Hormuz raised fears about high energy prices and global inflation. The commodity has advanced almost 90% this year.

Renewed tensions threaten to inject fresh volatility into markets after a month-long rally that helped global equities erase war-related losses and climb to record highs on strong earnings from megacap technology companies. Investors remain focused on the Strait of Hormuz, a key waterway that has been blocked for months, keeping energy prices elevated and risking higher inflation and slower economic growth.

“Even if the immediate conflict de-escalates, we expect the aftershocks will remain with us for some time,” said Darrell Cronk at Wells Fargo Investment Institute. “The effects — on energy prices, industrial activity, and geopolitical risk premia — are unlikely to fade quickly.”

In other corners of the market, the dollar strengthened against most of its Group-of-10 peers. Gold edged up 0.3% to around $4,535 an ounce, while Bitcoin advanced to around $80,200. Asian shares retreated from their record high close with markets in mainland China, Japan and South Korea closed for holidays.

“Asian markets are likely to trade with a cautious bias,” said Ritesh Ganeriwal, head of investment at Syfe Pte in Singapore. “This isn’t a full-blown risk-off move yet, but more of a geopolitical wobble that could show up in pockets of Asia — particularly energy-sensitive sectors and FX,” he said, adding that thinner holiday trading across several regional markets may further dampen activity.

The US fought off Iran’s attacks as it facilitated the passage of two vessels through the Strait of Hormuz. Meantime, the UAE blamed an Iranian drone strike for a fire at its Fujairah port and issued several missile alerts for the first time since a truce between Washington and Tehran took hold.

What Bloomberg Strategists Say…

The S&P 500’s decline on Monday sets the index up for a rebound the next day, based on its recent trading history since the war in Iran began.

— Kristine Aquino, MLIV. For full analysis, click here.

The wave of attacks came after a plan announced by President Donald Trump to help vessels through the critical waterway, with Tehran warning it would strike US forces if they came near Hormuz. Iran will be “blown off the face of the Earth” if it targets American ships in the region, Trump told Fox News.

Elsewhere, Federal Reserve Bank of New York President John Williams said interest rates will need to come down “at some point” if inflation returns to the US central bank’s 2% target, as he expects.

The Fed left its benchmark interest rate unchanged last week, though three officials dissented against the “easing bias” in the central bank’s post-meeting statement, favoring language signaling the next rate move could be either a hike or a cut.

Williams told reporters he was “very comfortable” with the current language in the statement because he doesn’t “see anything in the day-to-day” suggesting there’s an argument for a rate hike in the near term.

Corporate Highlights:

Palantir Technologies Inc. raised its revenue outlook for the year and beat analyst forecasts, offering a bullish forecast for a polarizing company at the nexus of debates over data, surveillance and artificial intelligence-enabled warfare. Grab Holdings Ltd. reported first-quarter profit that exceeded analysts’ estimates, helped by resilient demand for ride hailing and delivery in a Southeast Asian market rattled by economic and political challenges. Amazon.com Inc. unveiled a suite of logistics services that will let businesses buy its existing freight and distribution offerings as a package, sending shares of rival delivery companies such as FedEx Corp. and United Parcel Service Inc. lower. A startup backed by General Catalyst Partners agreed to acquire Global Business Travel Group Inc., the travel platform spun out of American Express Co., in a deal worth about $6.3 billion. Tyson Foods Inc. raised its full-year profit outlook as strong protein demand enables growth even as the struggling beef segment shows no signs of turning around. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 10:45 a.m. Tokyo time Australia’s S&P/ASX 200 fell 0.8% Hong Kong’s Hang Seng fell 1.4% Euro Stoxx 50 futures fell 0.4% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1685 The Japanese yen was unchanged at 157.24 per dollar The offshore yuan was little changed at 6.8343 per dollar The Australian dollar fell 0.2% to $0.7155 Cryptocurrencies

Bitcoin rose 0.4% to $80,249.93 Ether rose 0.5% to $2,361.74 Bonds

Australia’s 10-year yield advanced two basis points to 5.00% Commodities

West Texas Intermediate crude fell 1.5% to $104.86 a barrel Spot gold rose 0.3% to $4,536.77 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Bernadette Toh.

©2026 Bloomberg L.P.