New York, 28 May 2026 – Demand for US Treasuries has come under pressure as the Iran war strengthens the dollar, lifts inflation concerns and complicates the traditional safe-haven role of US government debt, according to Goldman Sachs.
The shift reflects an unusual market dynamic. In many periods of geopolitical stress, investors typically move into Treasuries for protection. This time, however, the conflict has pushed oil prices higher, strengthened the dollar and raised concerns that inflation may remain elevated for longer. That has made bond investors more cautious about adding duration, especially with US yields already sensitive to energy prices and Federal Reserve expectations.
The Iran war has split global markets into clear winners and losers, with crude oil prices surging roughly 40% and moving above US$100 per barrel, according to Reuters. The jump in energy prices has revived inflation fears and reshaped expectations for interest rates, while the US dollar has strengthened as a safe-haven asset.
A stronger dollar can reduce foreign demand for Treasuries by making US assets more expensive for overseas buyers. At the same time, higher oil prices can reinforce inflation expectations, pushing bond yields higher and weighing on the price of existing Treasuries. That combination has challenged the usual assumption that geopolitical tension automatically supports US government bonds.
Goldman Sachs had earlier noted that the Iran conflict had already contributed to higher bond yields, although losses for balanced portfolios had remained relatively limited. Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs, said in March that stocks had declined and bond yields had spiked since the start of the conflict, but the impact on diversified portfolios had been contained.
Recent market moves show how sensitive Treasuries have become to diplomatic signals. On Wednesday, the dollar and US Treasury yields retreated after reports of a possible US-Iran draft framework, with the ICE US Dollar Index falling 0.1% to 99.04 and the 10-year Treasury yield declining 2.2 basis points to 4.47%, according to MarketWatch.
Reuters also reported that US stocks closed at record highs as markets watched for progress in US-Iran peace negotiations, while hopes of de-escalation helped oil prices fall sharply and eased Treasury yields. The market reaction showed that investors are treating the conflict primarily through the lens of energy prices, inflation and monetary policy, rather than geopolitical risk alone.
Currency markets have also reflected the safe-haven bid for the dollar. The yen weakened toward levels that previously triggered intervention concerns, while the dollar was supported by renewed tension after peace talks stumbled. That dollar strength has added another layer of pressure for non-US investors considering Treasury purchases.
For Asian investors, the Treasury-demand story matters because US yields remain a key anchor for global borrowing costs, equity valuations and currency movements. When Treasury yields rise, Asian currencies can come under pressure, capital may flow toward dollar assets and regional central banks may face more difficult policy trade-offs.
The issue is especially relevant for energy-importing Asian economies. Higher crude prices can worsen trade balances, raise inflation expectations and increase fiscal pressure where fuel subsidies remain in place. If those pressures keep US yields elevated, the region may face tighter financial conditions even if local growth remains resilient.
The near-term outlook will likely remain headline-driven. Any progress toward a US-Iran agreement that eases oil-market pressure could support Treasuries by lowering inflation expectations. However, if the conflict keeps energy prices high and the dollar firm, foreign demand for Treasuries may remain uneven.
The Ledger Asia Insights
Goldman’s view highlights a major change in how investors are interpreting geopolitical risk. Treasuries are still a core safe-haven asset, but when conflict pushes oil prices higher and strengthens the dollar, bond demand can weaken instead of rise. For Asian markets, the key watchpoints are crude oil, the dollar, the 10-year Treasury yield and any diplomatic progress between Washington and Tehran. If oil prices stay elevated, the pressure could spread across currencies, borrowing costs and equity valuations, making Treasury demand an important signal for broader market stability.
