US-Iran Tensions Drive Oil Above $100, Pressuring Treasury Prices

US Treasury prices continued their downward trajectory on Tuesday, with yields rising as geopolitical tensions between the United States and Iran intensified. Despite a slight recovery from intraday lows, the benchmark ten-year note yield ended the session higher, reflecting a broader trend of bond market pressure. The primary catalyst for the volatility was a sharp spike in energy costs. Crude oil futures surged above $100 per barrel, reflecting investor anxiety over a stalemate in the Middle East and the potential for continued disruption in the Strait of Hormuz. This energy surge acted as a significant headwind for Treasuries, contributing to the upward movement in yields. Specifically, the yield on the benchmark ten-year note rose 1.8 basis points to 4.354%, having reached an intraday high of 4.378%. This follows a 2.6 basis point increase from the previous session, marking the highest closing level for the ten-year yield in one month. The geopolitical friction was highlighted by statements from President Donald Trump, who asserted via Truth Social that Iran is in a 'state of collapse' and is seeking to reopen the Strait of Hormuz quickly. While reports suggest a revised proposal from Iran is being mediated in Pakistan, the market remains cautious. Beyond the geopolitical turmoil, the fixed-income market is in a holding pattern ahead of Wednesday's Federal Reserve monetary policy announcement. While a rate hold is widely expected, traders are closely analyzing the accompanying statement for clues regarding the future trajectory of interest rates.