U.S. Treasury yields climbed on Thursday as investors weighed the economic fallout from the escalating war between the United States and Iran while digesting fresh labor market data that pointed to continued resilience in the American economy.
The benchmark 10-year Treasury yield rose more than four basis points to 4.131%, while the 30-year bond yield advanced more than three basis points to 4.752%. The policy-sensitive two-year Treasury yield also gained over three basis points to 3.574%.
Bond yields move inversely to prices, and the increase suggested investors were recalibrating expectations about inflation and interest rates amid mounting geopolitical risk and stronger-than-expected economic indicators.
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At the center of market attention is the rapidly intensifying confrontation in the Middle East, which has rattled energy markets and revived fears of a fresh inflationary shock driven by oil.
Crude prices surged after Iran said it had attacked an oil tanker, an incident that underscored the growing risks to shipping in the Persian Gulf. U.S. West Texas Intermediate crude futures jumped about 4%, while Brent crude rose more than 3%, pushing both benchmarks to their highest levels since June 2025.
The rally in oil prices is a reflection of mounting anxiety over potential disruptions in the Strait of Hormuz, the narrow maritime corridor between Iran and Oman through which roughly one-fifth of the world’s crude oil shipments pass. Any sustained disruption to traffic through the strait could quickly tighten global supply and send energy prices sharply higher.
Those risks have intensified since President Donald Trump announced measures aimed at protecting oil shipments in the region. The administration said the United States would provide risk insurance for maritime trade moving through the Gulf and could deploy the U.S. Navy to escort tankers through the Strait of Hormuz.
Trump said the policy was intended to guarantee the “free flow of energy to the world” and prevent Iran’s attacks on energy infrastructure and shipping from triggering a global supply crisis.
Still, many analysts say the move may only partially reduce the danger to oil markets. The conflict has already expanded beyond naval threats to include attacks on energy facilities across the region, with Iran reportedly targeting infrastructure in several Middle Eastern countries, including Saudi Arabia and Qatar.
Given the pace of escalation, some energy strategists and investors question whether naval escorts alone can shield the global oil supply from disruption. The risk is that sustained strikes on production facilities or export terminals could tighten supplies regardless of whether tankers can move safely through shipping lanes.
Such developments would feed directly into inflation expectations, a key driver of Treasury yields. Ross Pamphilon, chief investment officer at Impax, said bond markets are now being pulled in two directions by the unfolding crisis.
“Given the events in the Middle East U.S. Treasury yields are caught in a tug of war between oil-driven inflationary fears and the market’s traditional safe-haven status,” Pamphilon said. “While the situation remains fluid our strategy going into this situation was to modestly prune back risk and use a sell-off as a buying opportunity.”
Historically, geopolitical crises often trigger a flight into U.S. government debt, pushing yields lower. But when the shock threatens energy supply and fuels inflation, the opposite dynamic can occur, as investors demand higher yields to compensate for rising price pressures.
That tension has become increasingly visible in markets over the past several days, with oil prices surging while Treasury yields grind higher. Economic data released Thursday added another layer to the market’s calculations.
Initial jobless claims for the week ended Feb. 28 came in at 213,000, slightly below economists’ expectations of 215,000. The figure signaled that layoffs remain relatively subdued, reinforcing the view that the U.S. labor market remains resilient even as borrowing costs remain elevated.
At the same time, productivity and unit labor costs for the fourth quarter both rose more than expected, an outcome that can contribute to inflation pressures if companies pass higher labor expenses on to consumers.
Together, the figures reinforced the perception that the U.S. economy continues to show underlying strength, a factor that can keep upward pressure on Treasury yields by reducing the urgency for aggressive interest-rate cuts.
The data also arrives at a sensitive moment for monetary policy.
Investors are closely watching whether the renewed surge in oil prices could complicate the Federal Reserve’s efforts to bring inflation sustainably back to its 2% target.
Higher energy prices have historically filtered through the economy by raising transportation and production costs, which in turn can push up the prices of goods and services.
If the war in the Middle East keeps oil prices elevated for an extended period, analysts say it could slow the pace at which inflation falls and potentially delay interest-rate reductions that many investors had hoped would arrive later this year.
Markets are now turning their attention to the next major indicator of economic momentum: the U.S. nonfarm payrolls report for February, scheduled for release on Friday.
The monthly employment report is widely viewed as one of the most influential economic data releases because it provides a comprehensive snapshot of hiring, wage growth, and labor market participation.
A strong report could reinforce the view that the U.S. economy remains robust, potentially pushing Treasury yields higher if investors conclude that the Federal Reserve will need to keep interest rates elevated for longer. Conversely, signs of slowing hiring could ease some of the upward pressure on yields by reviving expectations of future policy easing.
For now, financial markets remain caught between two powerful forces: an economy that continues to show resilience and a geopolitical conflict that threatens to reshape the global energy market. Investors are bracing for continued volatility across bond, commodity, and equity markets as the war in the Middle East expands and oil prices react sharply to each new development.