TMGM Daily Market Breakfast: 02 September 2026

Morning Snapshot

• The United States struck Iranian military targets near the Strait of Hormuz and later said it had hit Iranian air-defence and naval sites linked to the IRGC, sharply escalating Middle East tensions.
• Oil prices surged as the Iran escalation raised supply and shipping concerns around Hormuz, with WTI climbing from around $86.95 to above $88.50 and later into the mid-$90s, while Brent traded above $90 per barrel.
• U.S. Treasury yields rose as markets focused on the inflation implications of higher energy prices, with the 10-year near 4.79%, the two-year around 4.39% and the 30-year near 5.28%.
• U.S. equities fell after the strikes were confirmed, with the Dow Jones Industrial Average down roughly 450 points, or 0.85%, near 52,750.
• The Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.75%, while the New Zealand dollar weakened and NZD/USD traded near 0.5855.
• Bank of Japan officials signalled that further rate increases remain on the table, as Hajime Takata said hikes must be conducted nimbly and Kazuo Ueda declined to comment on daily market moves.
• Japan's 10-year government bond yield reached 3% for the first time since 1996, underscoring the market focus on the Bank of Japan's policy path.
• Federal Reserve Governor Michael Barr said inflation remains too high and that a rate increase could become necessary if price pressures do not moderate soon.
• Euro-area flash inflation accelerated to 3.3% in August from 2.9% in July, while core inflation eased to 2.4%, keeping attention on the ECB's September meeting.
• Japan's finance minister said debt expansion is a global trend and that Tokyo's fiscal policy is aimed at growth and sustainability.

Market Developments

Energy

Crude oil jumped as the U.S.-Iran escalation intensified supply risks around the Strait of Hormuz. WTI was reported around $86.95 earlier in the session, then above $88.50 after fresh explosions in southern Iran, and later in the mid-$90s during Asian trade, while Brent traded above $90 per barrel.

U.S. Equities

The Dow Jones Industrial Average traded near 52,750, down roughly 450 points or 0.85%, after U.S. strikes on IRGC targets in Iran were confirmed.

Government Bonds

U.S. Treasury yields moved higher, with the 10-year near 4.79%, the two-year near 4.39% and the 30-year near 5.28%. Japan's 10-year government bond yield also reached 3% for the first time since 1996.

Foreign Exchange

The U.S. dollar strengthened as geopolitical tensions and higher Treasury yields supported demand. EUR/USD traded around 1.1601 after touching 1.1587, GBP/USD fell near 1.3510, USD/JPY traded around 160.05, and NZD/USD dropped toward 0.5855 after the RBNZ decision.

Gold

Gold fell sharply amid the rise in oil prices, Treasury yields and the U.S. dollar, with one report saying the metal dropped more than 2.30% on Tuesday.

Geopolitics & Energy

U.S. Strikes Iranian Military Targets Near Hormuz

The United States escalated its confrontation with Iran by striking Iranian targets near the Strait of Hormuz after President Donald Trump said Tehran was attempting to place sea mines in the waterway, which he said currently had none. Trump also said Iran fired eight missiles at a U.S. base in Jordan and that all were intercepted.

Later, U.S. Central Command said it had completed a wave of strikes against Islamic Revolutionary Guard Corps targets in Iran, including air-defence and naval sites. Separate reports cited explosions in Chabahar and Bandar Abbas, sharpening concerns over the security of shipping lanes linked to the Strait of Hormuz.

Oil Surges as Hormuz Supply Risks Intensify

Crude prices jumped as the military escalation raised the risk of disruption to energy flows through the Strait of Hormuz. WTI was reported around $86.95 earlier on Tuesday, then surged above $88.50 after fresh explosions in southern Iran, and later climbed into the mid-$90s during Wednesday's Asian session, marking a fresh high since July 24. Brent also traded above $90 per barrel.

The move extended an already firm run in oil, with WTI rising for a third straight day and posting gains in five of the previous six sessions. Reports highlighted growing concern over shipping risks, falling inventories, rising transport costs and emerging diesel shortages as the Middle East conflict continued to feed into energy markets.

Markets & Central Banks

Treasury Yields Rise as Markets Price Inflation Risk From Oil Shock

U.S. Treasury yields climbed as investors focused on the inflation implications of higher energy prices rather than seeking duration as a haven. The 10-year yield traded near 4.79%, about four basis points higher and its highest level since January 2025, while the two-year rose nearly five basis points to around 4.39% and the 30-year stood near 5.28%.

The move extended a fifth consecutive session of selling in Treasuries. One report noted that the 30-year yield had returned to roughly where it stood before the Treasury Department doubled the size of its long-dated buyback operation in August, lifting the maximum from $2 billion to at least $4 billion through November, after an initial decline to 5.19% had fully reversed.

U.S. Dollar Firms and Wall Street Falls After Iran Strikes

The U.S. dollar strengthened as rising Treasury yields and the Middle East escalation boosted demand for the currency. The Dollar Index reversed the previous day's losses, while EUR/USD traded around 1.1601 after touching 1.1587, GBP/USD fell near 1.3510 and USD/JPY traded around 160.05.

U.S. equities weakened after the strikes were confirmed. The Dow Jones Industrial Average traded near 52,750, down roughly 450 points or 0.85%, as investors reacted to the widening conflict. Gold also came under pressure, with one report saying the metal fell more than 2.30% on Tuesday as oil and yields moved higher.

RBNZ Raises Official Cash Rate by 25 Basis Points to 2.75%

The Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.75%, delivering the follow-through increase that had been widely anticipated from the previous 2.50% setting.

The New Zealand dollar weakened after the decision, with NZD/USD trading near 0.5855 during Asian hours.

BoJ Officials Keep Focus on Further Tightening as Japan 10-Year Yield Hits 3%

Bank of Japan board member Hajime Takata said the central bank must conduct rate hikes nimbly after assessing domestic financial conditions, reinforcing the message that further tightening remains under consideration. Governor Kazuo Ueda, speaking separately, declined to comment on daily market moves after talks with U.S. Treasury Secretary Scott Bessent on the sidelines of the G20.

Japan's 10-year government bond yield reached 3% for the first time since 1996, while USD/JPY traded around 160. Markets were reported to be pricing a high probability of a September BoJ rate increase, with one report citing a 92% chance. Bessent said he had emphasised the importance of sound monetary-policy formulation and communication to anchor inflation expectations and backed Japan's steps to address yen undervaluation.

Fed's Barr Says Rate Increase Remains Possible if Inflation Stays High

Federal Reserve Governor Michael Barr said inflation remains too high and warned that a rate increase could become necessary if price pressures fail to moderate soon.

His remarks added to the hawkish tone around U.S. policy after recent focus on inflation persistence and higher energy prices. Separate commentary also noted that the U.S. dollar had retained gains after Jackson Hole remarks from Fed Chair Warsh and that front-end Treasury yields had moved sharply higher.

Euro-Area Inflation Accelerates to 3.3% Ahead of ECB Meeting

Euro-area flash inflation rose to 3.3% year on year in August from 2.9% in July, while core inflation eased to 2.4% from 2.5%. Reports said the increase in headline inflation was driven mainly by higher energy prices linked to the Middle East conflict.

Details in the data pointed to energy inflation accelerating to 14.3% from 10.3%, services inflation easing to 3.0% from 3.3% and non-energy industrial goods inflation rising to 1.2% from 0.9%. ECB Governing Council member Joachim Nagel said he saw no second-round inflation effects, describing that as good news on inflation even as geopolitical tensions remained in focus.

Regional Policy & Trade

Japan Says Fiscal Policy Targets Growth and Sustainability

Japanese Finance Minister Satsuki Katayama said debt expansion is a global trend and said Japan's fiscal policy is aimed at growth and sustainability. She also said U.S. Treasury Secretary Scott Bessent had referenced U.S. strategies to manage debt.

China Faces Pressure From Trade Imbalances and External Restrictions

Rabobank said pressure is building on China's trade model as U.S.-led restrictions increasingly target links with Iran and Venezuela and as barriers to Chinese exports rise. The bank highlighted China's large trade surplus, weak domestic demand and mixed PMI signals as evidence of a growing imbalance between external supply and internal demand.

The commentary said official PMI data showed a slight improvement in manufacturing but further deterioration in non-manufacturing, with both sectors remaining below the threshold between contraction and expansion. It also said unofficial manufacturing figures pointed to faster-than-expected expansion, a combination that either worsens China's exportable surplus or raises questions over the durability of its growth target.