Trump Rejects Iran Ceasefire Proposal as Bond Yields Spike and Stocks Fall

US President Donald Trump recently rejected a seven-day ceasefire proposal put forward by Iran, immediately triggering a chain reaction across global financial markets. US Treasury yields continued to rise in a short period, with the 10-year Treasury yield breaking above the 4.4% threshold. The four major indices of the New York Stock Exchange—the Dow Jones Industrial Average, the S&P 500, the Nasdaq Composite, and the Russell 2000—all closed lower, significantly dampening investor sentiment.

The root of the current conflict can be traced back to the intense exchange of fire between Israel and Hamas. Since the fighting ignited in early October, it has spread to neighboring areas such as Lebanon and Syria. Iran, long exerting strategic pressure on Israel under the guise of supporting Palestinian armed forces, has repeatedly proposed ceasefires during international mediation processes. Over the past few months, the Trump administration has repeatedly expressed support for Israel's right to self-defense while maintaining a hardline stance against Iran's nuclear program and regional intervention. This direct rejection of Iran's ceasefire proposal effectively continues the high-pressure approach of US policy in the Middle East.

The rise in US Treasury yields reflects not only market concerns over geopolitical risks but is also closely related to current US inflation trends and monetary policy expectations. The Federal Reserve hinted at maintaining a tight policy during recent meetings, and market expectations for a higher likelihood of interest rate hikes have prompted investors to sell off long-term bonds in pursuit of higher immediate returns. Coupled with the escalation of the Middle East situation, which could drive up oil prices and further exacerbate inflationary pressures, investors have become more cautious about holding low-yielding bonds, leading to a rapid rebound in yields.

In the stock market, although the declines of the four major indices did not exceed single digits, they have demonstrated investors' risk-averse sentiment toward risk assets. The energy sector showed a brief positive performance driven by rising oil prices; however, technology and consumer stocks were sold off as higher future interest rates could compress corporate earnings. In particular, within the Nasdaq index, semiconductor and software companies characterized by high growth have valuations extremely sensitive to interest rate changes, suffering relatively larger declines. Market analysts point out that if the US continues to reject any form of ceasefire or diplomatic mediation, investors will further shift toward defensive assets, leading to increased stock market volatility.

For Taiwanese investors, this wave of volatility not only affects the performance of US stocks but may also impact the local market through capital flows and exchange rate fluctuations. A stronger US dollar and rising US Treasury yields are often accompanied by a relative weakening of the New Taiwan Dollar exchange rate, which in turn affects the competitiveness of export-oriented industries. On the other hand, if international capital flows into US Treasuries due to safe-haven demand, the capital supply in Taiwan's bond market may tighten, and yields could rise synchronously. Investors should closely monitor US policy directions toward Iran and the development of the Middle East situation, as any further military escalation or diplomatic breakdown could exacerbate uncertainty in global financial markets in the short term.

In summary, the Trump administration's rejection of Iran's ceasefire proposal has triggered a simultaneous decline in the US bond and stock markets within a short period, demonstrating that geopolitics remains a significant risk factor for capital markets. If the US continues to intervene in Middle Eastern affairs with a hardline posture in the future, market expectations for rising interest rates and inflationary pressures will further intensify. Investors must remain vigilant in risk management and asset allocation to maintain the stability of their investment portfolios amidst a changing international environment.