Foreign central banks have slashed their Treasury holdings at the New York Federal Reserve to the lowest level since 2012, according to Federal Reserve data. The value of Treasuries held in custody dropped by $82 billion since February 25 to $2.7 trillion, as countries sell US government bonds to prop up their economies and currencies.

This decline highlights how the surge in energy prices triggered by Iran's closure of the Strait of Hormuz has upended the finances of oil-importing nations. Countries including Turkey, India, and Thailand are likely selling Treasuries to pay higher dollar-denominated oil prices. Turkey's central bank alone has sold $22 billion of foreign government securities from its reserves since February 27.

The selling comes as the Treasury market faces pressure from Middle East conflict concerns that could drive inflation higher. Two- and 10-year Treasury yields have risen this month by the most since 2024, increasing borrowing costs across the economy. Some analysts suggest foreign official holders are "stocking the war chest" by cashing out Treasuries amid market volatility.