Analysis: War-Driven Energy Shock Adds Pressure to High Interest Rates

An analysis links the shift from the zero-interest-rate era to persistently high rates with war-related energy disruptions and inflation. It argues that the war is not a universal direct cause of higher rates, but can drive an energy shock that spreads through transportation, food and other prices. The analysis also questions how much AI infrastructure construction is affecting the rate data.

The analysis says mortgage rates have risen above 7% and Treasury yields above 5%, increasing refinancing costs for the US government and making housing and AI infrastructure expansion more expensive. It says Treasury yields rose as higher energy prices hurt the value of Treasury bonds, with oil transported through the Strait of Hormuz described as a pressure point in the conflict.

It cites August consumer-price inflation at 3.4%, PCE inflation at 3.7% and inflation excluding food and energy at 3.3%, compared with the Federal Reserve’s roughly 2% target. The analysis predicts that high inflation and rising energy prices will limit the Fed’s ability to cut rates, while an end to the war could ease rate pressure alongside other factors.