The conflict's primary impact on oil is not that supply is offline, but that its transport through the Strait of Hormuz is blocked. This distinction is key to understanding price scenarios, as supply exists but cannot be delivered.
The Iran conflict has created competing forces in the U.S. Treasury market. While geopolitical risk typically drives a flight to safety (lower yields), the threat of oil-induced inflation is pushing in the opposite direction (higher yields).
While short-term oil contracts react to immediate geopolitical stress, a sustained rise in longer-dated prices above $80-$85 indicates the market believes the disruption is persistent, signaling a more severe, long-term economic impact.
If the conflict leads to persistently high oil prices and sticky inflation, bonds may fail to act as a safe-haven asset. Both stock and bond prices could fall in tandem, undermining traditional balanced portfolio strategies.