The Squeeze Is Real — and the Numbers Prove It
The Strait of Hormuz remains effectively shut. Only six vessels transited on Tuesday, and two ships were attacked by unknown entities in recent days — even as President Trump posted on Truth Social that 'The Hormuz Strait is open and operating.'
The gap between the president's words and market reality is widening fast.
The 10-year Treasury yield now sits at 4.696%, well past the informal 4.5% red line Treasury Secretary Scott Bessent has been trying to defend. The 30-year has blown through 5%, landing at 5.284% — a level not seen since roughly 2003. Bessent has said publicly he wants the 10-year to carry a 'three handle,' meaning below 4%. The bond market has already voted.
A 'Deadly Cocktail' for Treasuries
Johns Hopkins economist Steve Hanke told Fortune that President Trump has inadvertently mixed what he called 'a deadly cocktail' for Treasuries. 'The bond vigilantes have come out of hibernation,' Hanke said, invoking the investors who punish reckless fiscal policy by selling government debt en masse — driving yields higher until policymakers change course.
As yields rise, so do interest rates on mortgages, car loans, and consumer credit across the board. The taxpayer feels it at the closing table and the dealership lot.
Fed Chairman Kevin Warsh has declined to offer the market 'forward guidance,' and investors have responded by selling U.S. bonds. Alpine Macro's Bassam Nawfal wrote in a note that 'the rise in the term premium and bear steepening of the curve following Warsh's first two FOMC meetings could indicate that the Fed's credibility is being tested.' Nawfal does forecast that incoming inflation data will be soft enough to prevent further rate hikes this year — a thin silver lining.
Tehran's Strategic Patience
Alpine Macro chief geopolitical strategist Dan Alamariu lays out the trap plainly. Iran's IRGC-dominated hardliners have stated they will not reopen Hormuz without controlling the Strait. Tehran is also demanding reparations, an end to sanctions, and a full U.S. military exit from the region. 'These are terms of capitulation Trump cannot accept,' Alamariu wrote.
The political math is brutal. 'American voters don't like presidents that lose wars,' Alamariu noted — but the longer the conflict drags on, the higher gasoline prices climb, and the worse Trump's poll numbers get. Alamariu predicts Iran will refuse any peace deal until after the midterms.
Meanwhile, Iran is not bleeding out economically. The country recorded $7.5 billion in foreign currency oil sales in the first four months of the year — 50% more than the prior year — according to the semi-official Fars news agency. Higher oil prices are offsetting Tehran's war costs.
Iranian parliament speaker Mohammad Baqer Qalibaf went further, announcing what he called 'a new regional order' in the Gulf in which 'the interference of foreigners and extra-regional actors in the region's equations is rapidly decreasing. American forces are seeking a dignified exit.'
Trump himself confirmed on Truth Social that 'there are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran.'
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Free enterprise runs on predictable rules, open sea lanes, and a dollar that holds its value. Right now, all three are under pressure simultaneously. The bond market is not ideological — it prices what it sees, and what it sees is a fiscal trajectory that was already strained before a war in the Gulf added an energy shock on top.
The administration's path forward requires clarity: on the Fed's mandate, on the endgame in the Strait, and on a fiscal posture that does not hand bond vigilantes an open invitation. Capital rewards clear rules. The longer the uncertainty persists, the higher the cost every American borrower pays.
