Wall Street institutions are cautioning that markets may be underestimating inflation and interest rate risks as U.S. equities remain elevated. The yield on 30-year U.S. Treasuries has surpassed 5%, with the 10-year yield rising above 4.5%, raising concerns about pressure on risk asset valuations. The ongoing conflict between Israel and Iran has kept international oil prices above $100 per barrel, with potential disruptions in the Strait of Hormuz heightening fears of renewed inflation. Capital Economics warns that markets have not fully priced in the possibility of a long-term blockade of the Strait. Despite support from the AI investment boom and strong corporate earnings, the S&P 500's forward P/E ratio has climbed to 21.3x, well above its long-term average, suggesting potential pressures on equities from valuation and liquidity constraints.