Oman-Iran negotiations stalled, and tough rhetoric pushed up oil prices; bond yields rose sharply, suppressing risk appetite; the US dollar rebounded moderately; the USD/JPY pair approached the 160 mark again; UK employment data was mixed, and market focus shifted to tomorrow's CPI data, leaving the pound's fate hanging in the balance. Oil prices rose amid overall weak market liquidity, with large trading institutions generally adopting risk management mode. The situation in the Middle East remains the core driver influencing market risk appetite. Over the past week, it was evident that negotiations between Oman and Iran lacked momentum, and various scenarios were possible. This week, a temporary agreement is possible, but the risk of renewed military conflict also exists, leaving investors uncertain about the short-term outlook. Although US Special Envoy Jared Kushner stated yesterday that dialogue between the US and Iran was progressing well, attacks on ships passing through the Strait of Hormuz, coupled with Iranian officials' statements indicating a shift towards an offensive stance, all signals suggest that the situation may escalate again. WTI spot oil prices continued yesterday's strong gains, attempting to hold above $85, but remain about 10% lower than the July 23 high, partly due to the shadow tanker fleet maintaining Middle Eastern crude oil supplies. However, the December 2026 WTI crude oil futures contract has already broken through the high point at the end of July, clearly reflecting increased market concerns about the medium-term outlook, which has been further amplified by the escalating conflict between Russia and Ukraine. Rising Bond Yields Dampen Risk Appetite Market risk sentiment is receding. Following yesterday's decline in US stocks, Asian stock markets generally weakened today. This is driven by sovereign bond yields in many countries climbing to multi-year highs. The yield on the 10-year US Treasury note was 4.75%, the yield on UK bonds of the same maturity approached 5.1%, and the yield on the 10-year Japanese government bond rose to 2.94%, a new high since 1996. The sharp rise in yields reflects rising inflation expectations and increased market concerns about the financing environment; this is particularly evident in the US, with only 40 days left before the potential government shutdown on September 30th. Logically, US stocks, especially the Nasdaq 100 index, should have experienced a sharp correction. The index's constituent stocks are highly sensitive to interest rates, particularly the AI sector: this field was poised to attract trillions of dollars in investment, but rising financing costs and energy and commodity prices will increase project costs. It's worth noting that market expectations for aggressive rate hikes by the Federal Reserve have cooled somewhat. Rising yields themselves tighten financial conditions, effectively doing part of the tightening work for the Fed. Current market pricing indicates a 32% probability of a 25 basis point rate hike by the Fed in September. Earnings reports from consumer companies such as Home Depot, Target, and Walmart this week may weaken market bets on a hawkish Fed stance. More importantly, several housing-related data will be released today; if the data falls short of expectations, it will further lower market expectations for a September rate hike. The dollar rebounded, and the USD/JPY pair rose. Rising US Treasury yields coupled with weakening risk appetite provided support for the dollar in a generally stable market environment. However, most institutions remain bearish on the dollar, citing reasons including US fiscal problems, expanding debt, and the Fed's dovish stance. June TIC international capital flow data showed a decline in overseas holdings of US Treasury bonds, with Japan and China being the main contributors to the reduction. The most closely watched exchange rate is USD/JPY. The yen again failed to appreciate due to a weaker dollar, and the exchange rate continued to rise, approaching 160, recovering half of the losses from the intervention at the end of July. The US dollar also rose against the Canadian dollar, reversing yesterday's losses, as Canadian inflation data was stronger than expected, and the market was closely watching the final stages of tariff negotiations. It's worth noting that August 19th (tomorrow) is the deadline set by Trump for tariffs, at which time some Canadian imports may be subject to a 50% tariff. In the UK, the number of people claiming unemployment benefits fell, but average wage data was strong, while the unemployment rate remained unchanged. With mixed employment data, the pound's movement is largely market-driven. The real test for the pound will come tomorrow: if the July CPI unexpectedly rises, it will reignite expectations of a Bank of England interest rate hike.