Australia’s 10-year government bond yield rose to around 4.9%, a four-week high, as global oil prices climbed on renewed US-Iran tensions. The United States launched a new wave of strikes against Iran and revoked a license that had allowed Tehran to sell oil, following recent attacks on ships transiting the Strait of Hormuz. This fresh escalation jeopardized the interim US-Iran peace arrangement and pushed oil prices higher, intensifying inflation concerns and increasing the likelihood of further interest rate hikes.
At the same time, Reserve Bank of Australia Assistant Governor Sarah Hunter noted that recent oil price shocks had undermined consumer and business confidence, though she maintained that the Australian economy remained resilient. She reiterated that the central bank stands ready to take whatever action is necessary to bring inflation back to target and sustain full employment. Even so, markets still expect the RBA to leave the cash rate unchanged in August after three hikes earlier this year, and the implied probability of another increase in November has eased to about 40%.
