Safe-Haven Rally as Conflict Escalates

• Middle East tensions re-escalated overnight as the Israel–Iran conflict rages on. Markets moved back into risk-off mode amid growing concerns over potential US involvement.
• US bond yields fell Tuesday as safe-haven demand lifted Treasuries. The 10-year yield dropped 6bps to 4.39%.
• US data overnight showed signs of underlying weakness in household demand and business activity: core retail sales fell 0.9% (vs. -0.6% expected), while industrial production declined 0.2% (vs. flat). Trade tariffs and fiscal tightening continue to weigh on sentiment.
• Tonight’s FOMC meeting is widely expected to leave rates unchanged. Focus will be on the updated dot plot and Powell’s tone—especially whether recent benign inflation data has made the Fed more confident in cutting this year.