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Iran Tensions Revive Inflation-Protected Bond Strategy

Energy price volatility from the Iran war is drawing fresh investor interest in inflation-linked bonds as a hedge against price pressures. The resurgence marks a notable shift in portfolio positioning as crude fluctuations and broader inflation concerns weigh on traditional fixed-income markets. Treasury yields have climbed to their highest levels in nearly a year, reflecting mounting expectations for interest-rate impacts tied to energy costs. Market strategist Ed Yardeni notes investors are absorbing the yield movement with relative composure, treating the oil-driven inflation spike as transitory. Unlike the 2022 energy shock, which inflicted losses on inflation-protected securities, current market positioning appears better calibrated. Prospects for diplomatic resolution between the US and Iran have periodically eased energy prices, providing some relief to inflation expectations. The dynamic underscores how geopolitical risk remains intertwined with investment strategy and inflation hedging decisions.