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

U.S. Treasury yields held mostly steady on Monday after spiking sharply higher last week, as investors digested fresh signs of rising energy costs and persistent inflation pressures tied to geopolitical turmoil in the Gulf. The 10-year Treasury note yield slipped one basis point to 4.587 percent, after touching its highest level in 15 months earlier in the session. The 30-year bond yield also eased one basis point to 5.119 percent, while the two-year note yield fell to 4.071 percent.

The moves followed a broad global bond selloff last week driven by elevated oil prices and concerns that supply disruptions could keep inflation elevated for months. Markets have grown increasingly uneasy over developments in the Strait of Hormuz, where Iranian authorities have restricted most shipping through the vital waterway that normally carries roughly one-fifth of the world’s oil and gas trade. Brent crude rose about 1.2 percent to around 110.55 dollars a barrel, and West Texas Intermediate climbed 1.4 percent to 102.48 dollars, with futures for later months trading above 100 dollars amid fears of prolonged shortages.

The latest flare-up stems from a series of drone incidents in the region. A strike sparked a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia reported intercepting three drones. President Donald Trump has urged Iran to move quickly toward a deal, yet the administration’s approach has so far coincided with tighter Iranian control over the strait and higher energy prices that are beginning to reach American consumers. Fresh data released last week showed price pressures filtering through to households, adding to worries that higher borrowing costs and sticky inflation could weigh on economic growth.

Finance ministers and central bankers from the Group of Seven nations gathered in Paris on Monday to discuss energy security and critical raw materials. European Central Bank President Christine Lagarde, asked about bond-market volatility, replied that worrying about such developments is simply part of her job. Yields on German 10-year bunds rose more than two basis points to 3.1827 percent, while Japan’s 10-year government bond yield jumped 13 basis points to 2.739 percent, its highest level since 1996. British 10-year gilt yields also moved higher.

Global equity markets retreated in response, with investors bracing for a key test later in the week when Nvidia reports earnings. Analysts noted that markets are pricing in the risk that energy costs remain elevated, which could curb spending and slow growth even as central banks weigh their next moves. The combination of higher oil prices, climbing bond yields and renewed questions over public-debt sustainability has left traders wary that the recent bout of volatility may not yet be over.

For ordinary households already coping with elevated living costs, the prospect of sustained high energy prices adds another layer of strain. Economists warn that if the Hormuz disruption drags on, the effects could ripple through supply chains and push inflation higher just as many families are trying to manage tighter budgets. Monday’s relatively calm trading in Treasuries offered only a brief pause after last week’s sharp moves higher in yields across the United States, Europe and Asia.