The "stagflation" risk premium is being repriced amid the Iran war, with undercurrents surging in the market.

1. As tensions between the US and Iran escalate again, financial markets are quietly repricing geopolitical risks. Despite Wall Street's overall calm performance, the oil, bond, and foreign exchange markets have begun to reflect "stagflation" pressures—the risk of surging energy prices alongside slowing economic growth is returning. 2. The oil market is the most visibly impacted sector. Over the past few weeks, Brent and US crude oil futures prices have soared about 30%, marking a year-on-year increase of 25%. The average gasoline price at US gas stations has climbed back above $4 per gallon, coinciding with the peak summer travel season and putting direct pressure on consumers. Meanwhile, tanker traffic through the Strait of Hormuz has sharply declined, global crude inventories have dropped significantly, and refining capacity is also constrained.3. The bond market has likewise started to feel the strain. With "term premium" rebounding rapidly, yields across various US Treasury maturities have generally risen. The term premium on 10-year Treasury bonds has risen from 0.46% at the end of June to around 0.70%, reflecting growing market concerns over long-term inflation and fiscal risks. The likelihood of the Federal Reserve cutting interest rates this year has diminished significantly, and policymakers' warnings about rate hikes have noticeably increased.4. However, Wall Street's overall response remains relatively restrained. The S&P 500 index is still only 2% below its historical high, and high-yield bond spreads are staying near lows seen since the financial crisis, indicating that the market is still focused on positive narratives such as artificial intelligence and corporate earnings. Whether this calm persists depends on whether the conflict escalates further.5. Moody's chief economist Zandi pointed out that if the war is not resolved before US Labor Day, oil inventories will drop to extremely low levels, causing oil prices to surge and possibly triggering a global shortage of refined oil products. Analysts believe that under the pressure of the November midterm elections, the Trump administration is motivated to de-escalate the situation; however, Iran's stance remains tough, and the window for peace is closing rapidly.