U.S-Iran strikes send oil, yields surging as Fed turns hawkish

Hello, this is Anniek Bao writing to you from Singapore. Welcome to another edition of CNBC’s Daily Open.

Those hoping the Iran war ends soon currently face disappointment.

It’s Groundhog Day in the Gulf, with Washington and Tehran trading strikes and pledging more to come. Investors are no longer treating the loop as background noise, repricing oil, bonds and taking into consideration a hawkish Fed.

The U.S. and Iran traded a fresh round of strikes Tuesday, with U.S. Central Command launching attacks on Iranian targets and Tehran claiming a retaliatory operation targeting American assets in the region.

Explosions lit up the sky above Aqaba, Jordan, after Iran said it was hitting back at the U.S. strikes — though it’s unclear what caused the blasts or whether Iranian missiles or drones were actually behind them.

Oil prices climbed higher on the military escalation, with Brent crude futures jumping to $94.52 a barrel and U.S. WTI futures hitting levels not seen since July.

Amid renewed worries over the Middle East conflict, Fed Governor Michael Barr said he’d support a rate hike “if inflation appears not to be moderating sufficiently,” echoing recent speech from Fed Chair Kevin Warsh. Markets are leaning toward a quarter-point hike this month, with the benchmark rate already at 3.50%-3.75%, according to the CME Group’s FedWatch tool.

At a regional security meeting, Russian President Vladimir Putin voiced support for Iran, saying his country would try to help Tehran in its war with the U.S.

The Shanghai Cooperation Organization summit in Kyrgyzstan brought together leaders, including Putin, China’s President Xi Jinping and India’s Narendra Modi, for a two-day conference.

Without directly naming Washington, the bloc’s leaders, in a joint statement, condemned the military strikes on Iran, which “resulted in numerous civilian casualties and significant damage to the country’s economy.”

As the U.S.-Canada trade standoff drags on, Canadian Prime Minister Mark Carney on Tuesday blasted the Trump administration for “doing memes … throwing shade,” urging Washington to “stop trying to be tough” if it wants serious trade talks.

He added that Ottawa remains open to “a mutually beneficial trade deal.”

Carney’s comments came in response to a reporter’s question about Trump officials mocking Canada’s military in social media posts and comments, and President Donald Trump signing an executive order directing the renaming of Lake Ontario to “Lake America” for federal government use.

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