Federal Reserve minutes show growing concern that inflation driven by the Iran war could persist above the 2% target, prompting discussions around possible future rate hikes. Several policymakers signalled tightening may be needed, marking a more hawkish shift. Bond yields rose as markets priced in reduced chances of rate cuts.

Inflation is rising again as energy shocks push markets to price in potential Fed rate hikes in 2026, shifting expectations away from cuts.

A majority of officials anticipated that interest rate increases would be necessary if the Iran war continued to aggravate inflation.