Pimco warned that the Iran war could prompt the Federal Reserve to raise interest rates rather than cut them, as surging energy prices complicate inflation efforts. Dan Ivascyn, chief investment officer at the $2.3tn bond giant, called rate cuts "counter-productive" given inflation dynamics that have pushed the Fed's preferred gauge to 3.5% in March, the highest in nearly three years.

Franklin Templeton's CEO Jenny Johnson agreed that inflation will be harder to control, making Fed rate cuts difficult. Investors are showing increased appetite for inflation-protected assets as rents typically rise with broader price increases. Both executives spoke at the annual Milken Institute conference in Beverly Hills.

The Fed's independence remains a key concern despite Trump's criticism. Pimco expects nominee Kevin Warsh to maintain independence on rate policy. Two-year Treasury yields have jumped about 0.5 percentage points since the war began, reflecting market expectations that rate cuts are off the table.