Oil collapsing on Iran peace hopes — buy long-term Treasury bonds as inflation pressure fades
Oil is having its worst month in six years as President Trump signals the U.S. is close to a peace deal with Iran. At the same time, U.S. government bonds are on track for their best week since the war started, because cheaper oil means lower inflation and less pressure on interest rates.
Idea
The Strait of Hormuz shutdown in February caused a massive energy shock, but now Trump is preparing a final decision on an Iran peace deal. Oil is already cratering — its biggest monthly drop in six years — and that's pulling inflation expectations down with it. When inflation cools, government bonds rally hard because investors expect interest rates to stay lower. Treasury bonds are already having their best week since the war began. If a deal is actually announced, bonds could surge even more. The main risk is that the deal falls apart and oil snaps back, which would hurt bond prices quickly.