The Iran war is driving inflation higher — and it's not just because of oil

US bond yields have surged upward over the past month, as yields on both the 10-year Treasury ( ^TNX ) and 30-year Treasury ( ^TYX ) have reached levels not seen since 2002, surpassing 2007 high-water marks in the lead-up to the financial crisis.

Investors have attributed the run-up in yields to a variety of concerns, from the artificial intelligence build-out and the competition for capital to changing foreign ownership of gold versus fixed income.

One overlooked source of upward pressure , argued Macquarie's Thierry Wizman, is not just the impact of the Iran war on the energy market but uncertainty about when the war will end or what the conflict will look like going forward.

"The perception that global conflict is endemic may also be causing long-term inflation expectation[s] to stay elevated," Wizman wrote to clients.

The uncertainty factor for investors, Wizman said, centers around the midterm elections.

President Trump has said he expects the war to wrap up shortly after the US midterms as he evaluates the success of the US naval blockade of Iran and Tehran's shift in leverage after the elections past. However, the president has also said he's considering a major renewed bombing campaign after the elections, which would likely push the conflict back into "hot war" territory and reignite tensions.

"This status quo can change dramatically after November 3, when President Trump, unfettered by domestic political considerations, will have more latitude to choose between peace and/or war, instead of sitting on the sidelines, kinetically and diplomatically," Wizman wrote. "Implied volatilities are starting to price in divergent two-way outcomes after November 3, when events can shift wildly one way or the other."

That makes it difficult for investors to evaluate what Wizman says is a critical component of the war in Iran: the conflict's impact on government spending.

At face value, the shuttering of the Strait of Hormuz and attacks on energy infrastructure throughout the Gulf region have sent energy prices soaring, depressing bond prices as investors price in higher inflation rates for longer. Brent ( BZ=F ) oil futures, the international benchmark, pushed back past $100 per barrel on Thursday.

But wars are also expensive to fight, as the US government writes checks for munitions restocks, fuel stores to power aircraft and naval vessels, combat pay for soldiers, and a litany of other costs. The latest figures submitted to Congress by the Pentagon indicate the US government has spent at least $43.6 billion so far, though outside research institutions suggest the actual sum could be far higher.