The 10-year U.S. Treasury yield jumped more than 7 basis points to 4.412% on Tuesday as oil prices rebounded and uncertainty over the U.S.-Israeli war with Iran kept traders on edge, reversing some of the relief that had briefly eased bond yields earlier in the week.
The 30-year yield rose more than 5 basis points to 4.971%, while the 2-year yield climbed more than 8 basis points to 3.912%. Yields move inversely to bond prices, so the selling pressure across the curve reflected renewed caution among investors.
The move followed a sharp swing in oil markets. Brent crude futures rose around 2% to $89.47 a barrel after dipping as low as $86.24 overnight.
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The rebound came after President Donald Trump said Washington and Tehran had held “very good and productive conversations” toward ending hostilities and that he had ordered a five-day pause on planned strikes against Iran’s energy infrastructure. Iranian officials quickly denied that any meaningful talks had taken place, prompting traders to reassess the situation and push prices higher again.
Analysts said the conflicting signals have left both energy and rates markets highly sensitive to headline risk. Ian Lyngen, head of U.S. rates strategy at BMO, wrote in a note that “headline risk remains particularly elevated as the war continues without a clear off-ramp.”
He added that U.S. rates are likely to take their primary cue from swings in energy prices until there is greater clarity on the conflict.
The Strait of Hormuz, which handles about 20% of global seaborne oil and a similar share of liquefied natural gas, has been largely closed to international traffic for most of the past three weeks following Iranian threats to attack vessels. Even brief periods of apparent diplomatic progress have been enough to swing prices and yields, only for fresh statements to reverse the move.
The yield increase also reflects a broader reassessment of inflation risks. Energy costs feed directly into consumer prices, and a sustained oil shock could complicate the Federal Reserve’s path toward lower rates. Traders are watching this week’s central bank meetings closely, with the Fed widely expected to hold steady on Wednesday, followed by the European Central Bank, Bank of England, and Bank of Japan on Thursday. Any hints in the statements or press conferences about how policymakers view the war’s impact on inflation expectations will likely set the tone for the rest of the week.
For now, the bond market is caught between two forces: the safe-haven bid that typically emerges during geopolitical stress and the inflation worry that pushes yields higher when energy prices spike. Tuesday’s move suggests the inflation concern is currently carrying more weight.
The 10-year yield’s climb above 4.40% puts it back near levels seen before Monday’s brief relief rally. If oil prices stabilize or continue climbing, analysts expect further pressure on the long end of the curve, particularly if the conflict drags on without a clear resolution.
While analysts hope for more data points, including U.S. inflation figures later this week, the dominant driver remains the situation in the Middle East. Stability is highly tied to de-escalation or a sustained reopening of the Strait of Hormuz. Treasury yields are expected to remain volatile and sensitive to every headline out of the region.