U.S. Treasury yields edged lower on Friday as investors positioned for a critical labor market report that could shape expectations for Federal Reserve policy, while markets simultaneously weighed easing energy fears tied to a possible U.S.-Iran diplomatic breakthrough.

The benchmark 10-year Treasury yield fell more than 1 basis point to 4.378%, while the policy-sensitive 2-year yield slipped to 3.912%. The 30-year Treasury yield also declined, falling to 4.956%.

The moves reflected a cautious recalibration across global markets after a volatile week dominated by geopolitical tensions, oil-price swings, and uncertainty over the inflation outlook. Treasuries had sold off sharply on Thursday as oil prices recovered part of their earlier losses amid renewed military exchanges between Washington and Tehran, raising concerns that the month-old ceasefire could collapse.

But by Friday, sentiment had steadied after Iran signaled the situation had returned to normal and the U.S. indicated it did not seek escalation, boosting market hopes that a broader peace framework could still emerge.

The improving geopolitical tone helped pull down yields and supported gold prices, even as traders remained reluctant to aggressively price in Federal Reserve rate cuts before the release of April’s closely watched nonfarm payrolls report. Economists surveyed by Reuters expect the U.S. economy to have added 62,000 jobs in April, sharply lower than March’s 178,000 increase, which had been the strongest monthly gain since late 2024.

The unemployment rate is expected to hold steady at 4.3%. The employment figures are likely to play a significant role in determining whether the Fed can maintain its current wait-and-see approach or whether signs of labor-market cooling eventually strengthen the case for policy easing later this year.

Recent economic data has painted a mixed picture. Weekly initial jobless claims released Thursday rose modestly to 200,000 from 190,000 the previous week, though the figure still came in below economists’ expectations of 206,000, suggesting the labor market remains relatively resilient despite slowing economic momentum.

At the same time, policymakers are facing growing uncertainty tied to energy markets and inflation risks stemming from the Middle East conflict. While oil prices remain elevated historically, crude has retreated significantly in recent days as markets increasingly bet that Washington and Tehran could eventually formalize a peace arrangement. U.S. West Texas Intermediate crude traded around $95 per barrel on Friday, while Brent crude is on track for a weekly decline of roughly 6%.

That retreat in energy prices has eased some fears that the conflict would unleash another prolonged inflation shock similar to the disruptions seen after Russia’s invasion of Ukraine. The moderation in oil also helped support the bond market, since lower energy costs reduce pressure on inflation expectations and long-term interest rates.

Gold prices climbed as investors balanced improving geopolitical sentiment with expectations that lower yields and a softer dollar could continue supporting precious metals. Spot gold rose 0.8% to $4,721.96 per ounce and was on track for a weekly gain of 2.3%, its strongest performance since late March. U.S. gold futures for June delivery rose to $4,730.90.

The rally in bullion comes after a turbulent stretch in which gold prices initially surged during the early stages of the Middle East conflict before retreating more than 10% as oil-driven inflation fears complicated expectations for interest-rate cuts.

“The market is already pricing in a (U.S.-Iran) peace agreement, which is yet to be signed or settled upon,” independent analyst Ross Norman said.

“So we’re seeing some confidence in the precious metals market.”

Although hopes for a diplomatic breakthrough have improved sentiment, investors remain concerned that persistent geopolitical instability, elevated energy costs, and strong fiscal spending could keep inflation above the Federal Reserve’s target longer than expected. That concern has become increasingly important for bond markets after several Fed officials recently emphasized that inflation risks remain tilted to the upside.

Markets now appear caught between two competing narratives. On one side, slowing payroll growth, easing oil prices, and softer Treasury yields support the argument for eventual monetary easing. On the other hand, continued labor-market resilience and lingering geopolitical risks argue for the Fed to remain cautious about cutting rates too soon.

The result has been a highly sensitive market environment in which each economic release and geopolitical headline rapidly shifts expectations across bonds, commodities, and equities.

Analysts say Friday’s payroll report could become especially important because it may help determine whether the recent surge in Treasury yields and energy-driven inflation fears represents a temporary geopolitical shock or the beginning of another broader inflation cycle.

Beyond gold, other precious metals also advanced.

Spot silver jumped 2.7% to $80.62 an ounce, platinum rose 0.2% to $2,047.12, and palladium gained 1.3% to $1,500.69. Silver and platinum were both headed for strong weekly gains, supported by expectations that easing geopolitical tensions and stabilizing rates could revive broader investor appetite for industrial and precious metals.

Danish shipping giant Maersk warned Thursday that the Iran war is inflicting mounting damage on global trade economics, with soaring fuel prices adding nearly $500 million to the company’s monthly costs and raising fears that a prolonged energy shock could eventually choke consumer demand worldwide.

The warning from one of the world’s largest container shipping companies sent Maersk shares down 7%, their steepest daily decline in more than a year, as investors focused less on current freight demand and more on the longer-term inflationary risks emerging from the Middle East conflict.

Chief Executive Vincent Clerc said the disruption caused by the war and the closure of the Strait of Hormuz had dramatically altered the cost structure of global shipping. According to Clerc, bunker fuel prices have surged from roughly $600 per metric ton to nearly $1,000, adding around 3 billion Danish crowns, or approximately $473 million, to Maersk’s monthly operating expenses.

“The energy crisis does not go away the day peace comes,” Clerc said during a press conference. “Oil companies I speak to expect it to last at minimum several more months, possibly many more months.”

The remarks highlight growing concern among corporate leaders that the economic consequences of the conflict may outlast any eventual ceasefire. While financial markets have frequently reacted to short-term headlines surrounding negotiations between Washington and Tehran, major industrial companies are increasingly preparing for a scenario in which elevated energy prices become embedded across the global economy well into 2027.

For the shipping industry, fuel represents one of the largest operating expenses, meaning sustained oil price increases ripple rapidly through global supply chains. So far, Maersk said it has managed to pass higher costs onto customers through spot-rate increases and renegotiated contracts.

But executives warned that the broader macroeconomic danger lies ahead. Clerc said freight demand has remained resilient through April and May, with global container growth tracking near the upper end of Maersk’s annual forecast range of 2% to 4%.

That resilience underpins how consumers and businesses have continued spending even as energy prices climbed sharply following the outbreak of the war. However, Maersk cautioned that the delayed impact of higher fuel costs could eventually spread into broader inflation, weaken household purchasing power, and reduce trade volumes.

The company warned that a combination of persistently high energy prices, slowing consumer demand, and a glut of new vessel deliveries could create what Clerc described as “a dangerous cocktail” for the industry. The concern is remarkable because Maersk is widely viewed as one of the clearest barometers of global trade activity. Weakness in container shipping often signals deteriorating industrial output, slowing retail demand, and weakening economic momentum across major economies.

The company’s latest warning, therefore, extends beyond shipping and into broader fears about the trajectory of the global economy. Analysts say the energy shock triggered by the Iran war increasingly resembles a classic supply-side inflation crisis, where transportation and fuel costs push prices higher even as economic growth weakens.

That dynamic complicates the outlook for central banks already struggling to balance inflation risks against slowing growth. The war has severely disrupted Gulf shipping routes after Iran closed the Strait of Hormuz, one of the world’s most strategically important maritime chokepoints through which roughly a fifth of global oil supply normally passes.

Maersk confirmed that six of its vessels remain trapped in the Gulf. Although Clerc said only 2% to 3% of global container trade flows directly to and from the Gulf region, the indirect impact through energy markets has become far more consequential.

Oil prices surged above $125 per barrel earlier this week before easing slightly amid hopes for a diplomatic breakthrough between the United States and Iran.

Shipping executives and economists warn that even if Hormuz reopens soon, logistical normalization could take months because tankers, inventories, and global cargo networks have already been severely disrupted.

The crisis is also reviving pressure on alternative maritime routes. Maersk has continued rerouting vessels around Africa instead of using the Suez Canal and the Bab el-Mandeb Strait, extending voyage times and increasing fuel consumption. The rerouting trend has strained global shipping capacity and contributed to higher freight rates across several trade lanes.

Clerc noted that there have been no attacks this year in the Red Sea by Yemen’s Iran-aligned Houthi movement, and said Maersk is evaluating whether conditions may allow a gradual return to those routes. Still, he stressed that security concerns remain significant.

“The one limiting factor is the limitation of availability of either escorts or monitoring assets from different European, U.S. or other navies to make sure that the crossing is safe,” he said.

Maersk’s earnings illustrated the conflicting pressures facing the industry. The company reported first-quarter EBITDA of $1.73 billion, beating analyst expectations of $1.66 billion but remaining sharply below the $2.71 billion recorded a year earlier.

Freight rates declined 14% year-over-year during the quarter before rebounding sharply after the war erupted. Analysts say the industry is also confronting a structural overcapacity problem as a wave of newly built vessels enters the market following years of aggressive ordering during the pandemic-era shipping boom.

Morningstar analyst Ben Slupecki warned that the overcapacity issue is likely to intensify into 2027 because of the large number of ships scheduled for delivery. That means shipping companies could soon face a painful combination of elevated costs and weaker pricing power if global demand slows.