Rising conflict around Iran is pushing up oil prices and interest rates, which is bad news for markets and for the Fed.

• Ukraine, Bahrain, and Kuwait are joining strikes against Iran, while Russia and China quietly back Iran.
• This is shaping up into two opposing camps, raising fears of a much wider war.
• The fighting is pushing oil prices higher and driving up government bond yields.
• Higher yields make the Fed's job harder and could force it to keep interest rates high.
• Any talk of a quick deal may just be Trump trying to pressure the Fed not to hike rates.

Outlook: Expect more pressure on oil and interest rates if the conflict keeps widening.