Middle East Crisis Triggers Global Bond Yield Surge and Pressures the Dollar

The collapse of the ceasefire between Washington and Tehran, coupled with geopolitical tensions in the Strait of Hormuz, has triggered a wave of risk aversion, driving sovereign debt financing costs to levels unseen in decades. The global fixed-income market is reacting with an aggressive sell-off of government bonds, reflecting fears of inflationary pressure via energy supply shocks. In Brazil, the impact is direct on the exchange rate, with the commercial dollar trading at R$ 5.2043, marking a 2.23% rise over the last 7 days. Utilizing Ray Dalio's credit cycle framework, we are in a liquidity contraction phase where risk premiums are soaring. Investors are pricing in a more severe global monetary tightening just as the real economy shows signs of exhaustion. For the next 30 days, we expect heightened volatility in the USD/BRL pair. We advise investors to follow Benjamin Graham's principles: prioritize capital preservation, reduce exposure to highly leveraged assets, and focus on companies with robust cash generation.