Rates Move Higher as Market Monitors Middle East Conflict and Prepares for FOMC Rate Decision

FLASH MARKET UPDATE: TUESDAY JULY 21, 2026

Rates are moving higher this morning – SOFR swap rates are up ~3-5 bps across the curve, as tensions flare up in the Middle East, pushing oil prices higher and shutting down the Strait of Hormuz. Rates clearly remain biased higher for now. The situation in the Middle East remains unstable and highly uncertain – that is keeping the focus on inflation and the wider impact of the conflict. Middle East war developments are likely to remain the primary market catalyst for the near term.

Traders are also looking ahead to next week’s FOMC rate decision. The Fed is not expected to hike, but traders will be very interested in the Fed’s “go-forward” thinking. There is also a lack of key economic data released between now and the Fed meeting. That will only keep the even more squarely on the US-Iran conflict. Expect rates to drift higher on news US-Iran hostilities are escalating or on higher oil prices. News that a ceasefire has been reached, or a surprise peace announcement would likely push rates lower.

CHART 1: US RATES SNAPSHOT - 9:45 AM Eastern

Chart 1 Key:

• Far Left Columns: US Treasury Yields & Change on Day (bps)

• Center Columns: SOFR OIS Swap Spreads (bps) & Change on Day (bps)

• Far Right Columns: SOFR OIS Swap Rates & Change on Day (bps)

Source: Bloomberg, LLP | 9:45 AM NY Rates Snapshot

US-IRAN WAR IMPACT: Key SOFR Swap Rate Movements Since The US-Iran War Began:

• The 2-year SOFR swap rate closed at 3.21% on Friday 2/27 – it is currently trading at ~4.096% (+88.6 bps).

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~4.083% (+86.3 bps).

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27 – it is currently trading at ~4.217% (+69.7 bps).

• SOFR swap rates are currently trading very close to 12-month highs.

CHART 2: ANNUAL OIS BREAKEVEN 2Y SOFR SWAP RATE - PRIOR 30 DAYS

Source: Bloomberg, LLP | 2Y SOFR SWAP RATE - PRIOR 30 DAYS

CHART 3: STRAIT OF HORMUZ TANKER TRAFFIC SHUT DOWN BY RENEWED US-IRAN HOSTILITIES

Source: Bloomberg, LLP | STRAIT OF HORMUZ TANKER TRAFFIC YEAR-TO-DATE

Disclaimer:The information provided in this communication is intended for discussion purposes only. Nothing presented in this communication should be taken as a recommendation or forecast. All market data shown is indicative only and subject to change depending on current market conditions. The information in this publication is confidential and is intended for the recipient only.