US Treasury yields surged Thursday as Iran launched strikes, with the benchmark 10-year note climbing roughly four basis points to 4.79%, marking its highest level since January 2025. The move extends a fifth consecutive session of selling pressure in the bond market, though traders appear to be interpreting the geopolitical escalation primarily through an inflationary lens rather than traditional safe-haven dynamics.
The upward pressure on yields suggests market participants are pricing in potential supply chain disruptions and energy price spikes stemming from Middle East tensions, rather than fleeing to the safety of US government debt. This reaction indicates concerns that Iranian military action could reignite commodity price pressures and complicate the Federal Reserve’s inflation fight, potentially limiting the central bank’s ability to cut interest rates in coming months.
Fixed income traders, currency desks, and equity futures markets are experiencing heightened volatility as the situation develops.
FXnCO Insight
Monitor crude oil prices and inflation swap rates closely, as sustained geopolitical tension could force a hawkish Fed pivot and extend the bond selloff.
Source: FXStreet