Gulf Tensions Lift Oil Above $110, Pushing Yields to 15-Month Highs

Energy prices climbed and borrowing costs rose as shipping lanes through the Strait of Hormuz stayed largely shut and fresh drone incidents hit Gulf facilities. The moves left investors weighing whether higher fuel costs would keep inflation elevated and slow growth. U.S. 10-year Treasury yields reached 4.631 percent, the highest level in 15 months, after advancing 23 basis points the prior week. The 30-year yield climbed to 5.159 percent. Brent crude traded near $110.55 a barrel and West Texas Intermediate futures exceeded $102, with September contracts above $100 and December futures at a record. European equities fell 0.4 percent on average, with Paris down 0.9 percent while Frankfurt and London posted small gains. A drone strike set a fire at a nuclear power plant in the United Arab Emirates, Saudi Arabia intercepted three drones, and President Trump said Iran must act quickly on any agreement. G7 finance ministers met in Paris to address energy supplies and raw materials, though differences among members limited coordinated steps. George Lagarias of Forvis Mazars noted that markets were pricing the risk of a prolonged closure but added that the episode was unlikely to trigger a broad equity correction unless it became a credit event. Christine Lagarde said she always worries about bond volatility. Japan's 10-year yield reached its highest point since 1996 after the government proposed new debt to offset war-related costs. German 10-year yields rose to a 15-year peak. The 2-year Treasury yield eased to 4.071 percent. Oil futures for later months reflected expectations of extended supply shortfalls rather than a quick rebound.