Just caught something worth paying attention to in the markets. The U.S.-Iran negotiation falling apart is creating real ripple effects, and with potential Strait of Hormuz disruptions, energy prices are becoming the main story again.

What's interesting is how quickly the narrative shifted. A few months back everyone was worried about recession. Now? Inflation is back in focus. March CPI came in at 0.9% month-over-month - that's the biggest monthly jump since 2022. Not exactly the number the Fed was hoping to see.

The bond markets are feeling the pressure. 10-year Treasury yields broke above 4.3% and are hovering around 4.35%. But it's not just the U.S. - Japan's 10-year JGB hit levels we haven't seen since 1997. Australian and New Zealand bonds are moving higher too. This is a coordinated bond market selloff across the globe, which tells you something about how serious traders are taking this.

Here's what's got institutions spooked: this looks like a supply-side inflation shock. Energy costs rising due to geopolitical tension, not demand destruction. That's the kind of inflation that's harder for central banks to fight. With employment still holding up well, the Fed has zero incentive to cut rates anytime soon. Traders have basically pushed their rate cut expectations to mid-2027 now.

PIMCO, Brandywine Global, Natixis - the big money is taking a wait-and-see approach. They want to see where inflation actually settles before making big moves. If oil stays elevated or we lock into this higher rate environment for longer, financial assets are going to feel the squeeze. The bond markets are pricing in a much stickier inflation scenario than we were talking about just weeks ago.