U.S. Treasury Secretary Scott Bessent announced fresh sanctions against Iran on Monday, and the pressure landed fast: the rial sank to a record low against the U.S. dollar while oil prices barely moved and Asian markets opened mixed on Tuesday.
Who Pays for the Decisions at the Top
The people at the bottom of this setup don’t get a vote on any of it. They get the bill. They get the price swings, the borrowing costs, the mortgage pain, and the currency collapse. Early Tuesday, Brent was nearly unchanged at $90.51 per barrel, while U.S. benchmark crude oil edged less than 0.1% higher, to $85.10 per barrel. The sanctions announcement helped drag Iran’s currency down, and the market treated that like just another data point.
Asian shares were mostly lower Tuesday after U.S. stocks drifted to a mixed finish ahead of potentially market-moving events later in the week. Regional benchmarks traded in a narrow range and U.S. futures were nearly unchanged. Tokyo’s Nikkei 225 gained 0.4% to 65,811.19, but the Kospi in South Korea fell 0.4% to 6,675.88. Hong Kong’s Hang Seng lost 0.3% to 25,453.19, while the Shanghai Composite index edged 0.1% lower, to 3,878.38. In Australia, the S&P/ASX 200 gained 0.6% to 9,158.70. Taiwan’s Taiex edged less than 0.1% lower, while the Sensex in India lost 0.3%.
What the Market Calls Stability
On Monday, areas of the bond market that the U.S. Treasury Department has been trying to calm eased a bit, relieving pressure on stocks. The S&P 500 slipped 0.3% and pulled a bit further from its all-time high set earlier this month. The Dow Jones Industrial Average added 0.3% and the Nasdaq composite fell 0.8%.
Tech stocks led the decline after big swings through the summer on worries that the frenzy around artificial-intelligence technology has sent prices too high and huge demand for AI chips will falter if AI doesn’t yield enough profits. Chip giant Nvidia, a tremendous winner of the AI boom, will deliver its quarterly earnings report on Wednesday. That could dictate the next big move for AI-related stocks. Nvidia sank 2.9% on Monday and was the heaviest weight on the S&P 500, where the majority of stocks rose. Drops of 5.8% for Micron Technology and 2.6% for Broadcom also helped drag the index lower.
The bond market tells the same story in colder language. The yield of the 10-year Treasury eased to 4.71% from 4.74% late Friday, returning to where it was last week before the U.S. Treasury Department announced a surprise move to increase the size of its planned buybacks of Treasurys. Analysts say the buybacks are relatively small and will not fix the fundamental problems of excessive U.S. government debt and high oil prices because of the war with Iran. Longer-term Treasury yields climbed through the summer on worries about high inflation, huge government debts and other factors. High yields make it more expensive for everyone to borrow, not just the government, and already have pushed up mortgage rates and hurt the housing industry.
The Apparatus Tries to Manage the Damage
“The latest discussion about using Treasury General Account cash to help finance purchases of longer-dated bonds gave the market something to chew on Monday, and it initially liked the taste. Long yields fell, and the curve flattened,” Stephen Innes of SPI Asset Management said in a commentary. “But there is a difference between forcing the bond market to blink for an afternoon and solving the underlying problem,” he said.
That’s the whole game in one sentence. Short-term relief, long-term rot. The Treasury Department can nudge yields, the Fed can prepare speeches, and traders can pretend the machinery is under control, but the costs keep rolling downhill.
The Federal Reserve’s new chairman, Kevin Warsh, is set to deliver a speech Friday at an annual economic symposium in Jackson Hole, Wyoming, the backdrop for past policy announcements. Analysts say Warsh is likely to talk about inflation and how the Fed plans to deal with it. Oil prices are a major factor behind higher costs and Brent crude, the international standard, has been trading above the $72 per barrel level it was at before the war with Iran began in late February.
The market keeps waiting for the next signal from the people who run the system. Workers, borrowers, tenants, and anyone trying to survive the fallout don’t get that luxury. They get the consequences.