Iran Puts a Number on Peace — the Bond Market Isn't Buying It Yet

Jimmy Wong

Iran's Foreign Minister Abbas Araghchi has put a specific, time-bound offer on the table: a seven-day framework under which the Strait of Hormuz would reopen if the US agrees to a Middle East-wide ceasefire, including Lebanon, releases more than US$12 billion in frozen Iranian assets, lifts sanctions on Iranian oil exports, and ends its naval blockade. The proposal followed a three-hour meeting between Araghchi and Trump's envoys Steve Witkoff and Jared Kushner on the sidelines of the UN General Assembly, mediated by Qatar. China's Xi Jinping, in Washington the same week for a state visit, has reportedly signalled support for the plan. As of Friday, Tehran was still waiting on a formal US response. It is the first time either side has put concrete terms and a deadline on the table in this conflict. But a near-identical framework agreed in June collapsed within weeks, giving this proposal a direct precedent for falling apart too.

Gold eased to around US$4,280/oz by Friday, down roughly 2% for the week, as a stronger US dollar and Treasury yields at their highest in nearly two decades outweighed hopes that a Hormuz deal would ease the war premium. Silver held closer to US$64, giving back less ground, with both metals firming modestly into the weekend as bargain hunters stepped in.

The bigger move sat in the bond market. The US 30-year Treasury yield touched 5.46% on Thursday, its highest since 2004, while the 10-year topped 5.2%, a level last seen in 2007. Germany's 10-year Bund broke above 3.6%, a 17-year high, and Japanese long-end yields hit their highest since 1996. Elevated energy costs, resilient growth and heavy government borrowing all point to inflation staying stickier than central banks would like. The pressure is already reaching households: US 30-year mortgage rates are near 7%, about a full percentage point higher than before the Iran war began. Higher yields are typically a headwind for gold, but a bond market under this much stress is also the kind of backdrop that keeps gold's appeal as a hedge against financial-system strain alive.

Fuel costs are adding to inflation pressure from two separate wars at once. Ukrainian drone strikes have forced half of Russia's largest diesel refineries to cut or halt output, while the Trump administration is reportedly weighing a 90-day ban on diesel exports to ease record US prices. The White House has since denied that report, though officials confirm some form of export restriction is under discussion. AMP economist Shane Oliver warned this week that Australian petrol, near A$2.39/litre, could climb past A$2.70 if oil pushes toward US$150/barrel in a worst-case scenario.