Treasuries Extend Slump as Oil Spike Pressures Bonds

Treasuries were under renewed pressure on Tuesday as investors reacted to a sharp rise in crude prices and a fresh escalation in Middle East tensions. After an early attempt to recover, bond prices lost ground again through the session and yields moved higher.

Oil shock and geopolitics

The benchmark 10-year Treasury yield rose 3.8 basis points to 4.796%, its fifth straight daily gain and the highest closing level since October 2023. That move came as U.S. crude futures jumped more than 5%, a shift that quickly revived concern about inflation and the path for interest rates.

The bond selloff accelerated after U.S. Central Command said it had carried out new strikes on targets tied to Iran’s Islamic Revolutionary Guard Corps. Centcom said the action followed recent attempts by the IRGC to attack commercial shipping in the Strait of Hormuz and U.S. troops in the region. President Donald Trump also warned on Truth Social that Iran would face a harsher response if it retaliated.

Those developments added to a market already sensitive to energy supply risks. Higher oil prices tend to feed expectations for stronger inflation, which can make fixed-income securities less attractive and push yields higher as investors demand more compensation.

What the move means for markets

The session showed how quickly Treasuries can swing when geopolitical risk intersects with energy markets. Bonds briefly steadied near unchanged in late morning trading, but that resilience faded in the afternoon as the oil rally and the military news dominated sentiment.

Later in the day, Treasuries found some support after the Institute for Supply Management released a report that pointed to a softer backdrop in the economy, but the rebound was not enough to reverse the broader move. The result was a third straight source of pressure on bond prices: higher oil, renewed conflict risk and a firmer rate outlook.

For fixed-income investors, the immediate signal was a stronger yield backdrop rather than a flight to safety. With the 10-year note now at a multi-month closing high, the market is showing growing sensitivity to any fresh energy or geopolitical shock.

This article is not investment advice and recommends no asset, level or direction; a single session's move is not evidence of a trend. For background see Markets, Bear Market, BIST 100, and for terms the finance glossary.