U.S. Treasury yields climbed across the curve on Thursday, following a global trend in government bond markets. Short-term yields saw the sharpest spikes as investors reacted to rising inflation fears linked to the escalating conflict. At 6:50 a.m. ET, the benchmark 10-year Treasury yield was up 2 basis points at 4.279%, while the 2-year note surged 6 basis points to 3.807%. The 30-year yield also ticked higher, reaching 4.893%.
The moves came as investors digested the Federal Reserve’s decision to hold its key interest rate steady on Wednesday. The Fed noted that the implications of developments in the Middle East for the U.S. economy remain uncertain, while updating its forecasts for inflation and future interest rate paths. Central banks in Japan, Switzerland, and Sweden cited the conflict as a factor in their decisions to maintain current rates, reflecting global concern over the economic impact of rising geopolitical risks.
Heightened tensions in the Middle East have added to worries about an energy shock. Overnight, oil prices touched $119 a barrel after strikes targeted energy facilities in Qatar. Israel’s attack on South Pars gas field prompted retaliatory missile strikes, while President Donald Trump threatened a massive U.S. response if further attacks on Qatar occur. These developments have stoked fears of supply disruptions that could further fuel global inflation.
Analysts note that the market is increasingly pricing out the likelihood of rate cuts this year. Deutsche Bank strategist Jim Reid highlighted that the combination of ongoing strikes against energy infrastructure and the Fed’s “more watchful tone on inflation” under Chair Jerome Powell has shifted investor expectations toward a prolonged period of tighter monetary policy. As a result, Treasury yields are likely to remain elevated in the near term.
