Treasury Yields Climb as Oil Shock Complicates Fed Outlook

​Bonds React to a Widening War
US Treasury yields pushed higher as investors recalibrated expectations amid an escalating conflict between Washington and Tehran. The benchmark ten-year yield rose nearly four basis points to about four point zero nine percent, while the thirty-year climbed above four point seven two percent. The two-year yield, often seen as a proxy for Federal Reserve policy expectations, advanced to roughly three point five three percent.

Risk Off, but Not Into Bonds
Despite a clear shift into risk-off mode across equities, bond prices didn’t get the usual safe-haven bid. Instead, rising oil prices and mounting fears of supply disruptions are stirring fresh inflation concerns. Iran has reportedly moved to close the Strait of Hormuz, sending crude higher and raising the specter of renewed price pressures just as the Fed weighs its next move.

Embassy Attack Raises Stakes
The conflict entered its fourth day with the US Embassy in Riyadh attacked and Israel launching strikes in both Iran and Lebanon after missile and drone fire toward Tel Aviv. President Trump warned the war could last far longer than initially projected. Markets are now trying to price not just geopolitical risk, but the economic fallout from a prolonged energy shock.

Inflation Path Gets Murkier
​Higher crude prices feed directly into inflation expectations, which in turn shape bond yields. Gold briefly rallied on safe-haven demand before paring gains, while global equities slid. The message from the bond market is clear: if energy costs stay elevated, the Federal Reserve may have less room to cut rates than traders once hoped.