Australia’s 10-year government bond yield climbed above 4.9%, hitting a five-week high as rising tensions in the Strait of Hormuz stoked fresh inflation concerns. US President Donald Trump has reimposed restrictions on Iranian vessels transiting the Strait and urged countries that benefit from US efforts to secure this critical shipping lane to share the associated costs. The decision followed a renewed flare-up between Washington and Tehran, with the US targeting Iran’s maritime capabilities and Tehran responding against US allies in the region.
In Australia, investors are reassessing the policy outlook amid a light economic calendar this week. Some market participants believe the Reserve Bank may have finished its tightening cycle after three rate hikes brought the cash rate to 4.35%, with the probability of another increase this year seen at roughly 50%. Upcoming labour market and inflation figures, due later this month, will be scrutinized for indications of whether underlying price pressures remain strong enough to justify further monetary tightening.
