By Joy Wiltermuth
Wall Street jitters around the Iran war spilled over Tuesday into a vital part of U.S. financial markets that typically hum along without a hitch
President Donald Trump looks on as Secretary of Defense Pete Hegseth speaks about the Iran war on Tuesday in the Oval Office.
Wall Street jitters about the Iran war spilled over Tuesday into a vital part of U.S. financial markets that typically hum along without a hitch.
Reports of Pentagon plans to deploy roughly 3,000 soldiers from the Army's 82nd Airborne Division to the Middle East were blamed Tuesday for a weak $69 billion sale of 2-year Treasury notes.
Typically, 2-year auctions go largely unnoticed, beyond the dealers and buyers involved in the roughly $30 trillion Treasury market. It's often a place that safe-haven seekers and corporations look to park cash for a while and earn a bit of yield. The auction starts, buyers line up.
But Tuesday's auction went &#34;miserably,&#34; making it hard not to notice, with yields on the policy-sensitive 2-year rate BX:TMUBMUSD02Y advancing 9.6 basis points during the session to 3.926%, its highest yield in nearly eight months, according to Dow Jones Market Data. The rate now is 45 basis points higher in 2026.
Treasury yields typically fall, not rise, when the Federal Reserve is engaged in a rate-cutting cycle.
But the recent yield climb reflects growing concern about dimming hopes for further Fed rate cuts this year, and potentially rate hikes. A prolonged Iran conflict could mean oil prices stay higher for longer, and risks inflation becoming a bigger problem the longer that hostilities drag on.
Brent crude prices (BRN00) settled above $104 a barrel on Tuesday before easing in extended trade. U.S. stocks SPX closed lower, while Treasury yields BX:TMUBMUSD10Y climbed across the board. Oil prices fell in extend trading Tuesday, after Israeli news reports indicated a 30-day cease-fire could be announced.
To be sure, the Treasury still was able to raise almost $70 billion to help fund the U.S. government on Tuesday, paying slightly less than 4%. The U.S. has an estimated $10 trillion in debt coming due in the next year, and its costing more to borrow in the open market as the Iran conflict moves through its fourth week.
This comes as Wall Street grows alarmed about potential U.S. troops on the ground in the Middle East that could lead to a more protracted conflict. It also could put even higher oil and gas prices in play, as well as increased costs for fertilizer, transporting goods and many products based on petrochemicals. Furthermore, rising yields increase borrowing costs and tighten financial conditions.
&#34;The market is starting to doubt that this is going to be easy,&#34; said Ameriprise chief market strategist Anthony Saglimbene, in a phone interview. He pointed to economic data on Tuesday that suggests the surge in oil prices already has put more stress on the U.S. economy in the form of higher prices and a drop in employment.
Read: The Iran war spills over into the U.S. economy: Inflation rises and growth slows
&#34;I'd expect stocks to struggle until there's more clarity on the Middle East, and crucially around the Strait of Hormuz,&#34; Saglimbene said.
-Joy Wiltermuth
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(END) Dow Jones Newswires
03-24-26 1819ET

ONEQ

Wall Street is experiencing anxiety over the Iran war, impacting U.S. financial markets. A weak $69 billion auction of 2-year Treasury notes was attributed to concerns over potential troop deployments to the Middle East. Yields on 2-year notes rose to 3.926%, the highest in eight months, reflecting worries about inflation and borrowing costs. The ongoing conflict could lead to prolonged high oil prices, affecting the economy. Analysts suggest that market uncertainty will persist until there is more clarity regarding the situation in the Middle East.

- Wall Street experienced jitters on concerns about the Iran war, impacting the $69 billion sale of 2-year Treasury notes, which performed poorly amid plans to deploy soldiers.  
- Yields on 2-year rates climbed to 3.926%, the highest in nearly eight months, reflecting worries over potential inflation and a delay in Federal Reserve rate cuts.  
- Furthermore, rising yields are increasing borrowing costs, with analysts predicting continued market struggles until there is clarity regarding the conflict in the Middle East.

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A bad Treasury auction is offering a glimpse into the anxiety on Wall Street over the Iran war