Bond traders are aggressively buying US inflation-protected securities as the Mideast conflict drives energy prices higher. The cost of inflation-linked payments in Treasury markets and swaps has surged since the US and Israel launched attacks on Iran, with investors seeking protection against rising consumer prices.

This rush into inflation hedges has pushed valuations to their highest levels in nearly a year. The market reaction reflects growing concerns that sustained oil price increases from the conflict could fuel broader inflationary pressures across the US economy.

Investors are particularly focused on products tied to the US consumer price index, which offer payouts that adjust with inflation. The timing is notable as energy costs typically have an immediate impact on inflation metrics, making these hedges increasingly valuable in the current geopolitical climate.