A sharp escalation in the Iran conflict has sent crude oil prices soaring, triggering the most severe weekly selloff in global Treasury markets since the 'liberation day' volatility of 2023. The benchmark 10-year U.S. Treasury yield climbed above 4.8%, while the CBOE Volatility Index (^VIX) spiked to 34.2, signaling heightened market stress.
- CL=F crude oil rose above $108 per barrel amid extended Iran conflict
- 10-year U.S. Treasury yield climbed to 4.82%, up 18 bps in one week
- 30-year Treasury yield reached 5.01%, marking its worst weekly performance since 2023
- ^VIX surged to 34.2, reflecting sharp risk aversion
- Global bond yields rose across Germany, Japan, and the U.S.
- Market now assigns 60% probability to a Fed rate hike in May
Global Treasury markets plunged in the week ending March 6, 2026, as oil prices surged past $108 per barrel on the CL=F contract amid an extended conflict involving Iran and regional actors. The sustained escalation, including attacks on shipping lanes in the Red Sea and increased missile activity from Iranian-backed proxies, has reignited fears of a broader Middle East war and supply disruptions. This risk-off sentiment overwhelmed any relief from Federal Reserve rate cut expectations, pushing bond prices lower and yields higher. The 10-year U.S. Treasury yield rose by 18 basis points over the week, closing at 4.82%, its highest level since early 2023. The yield on the 30-year Treasury reached 5.01%, marking the steepest weekly increase since the geopolitical shockwaves of 2023. The benchmark Treasury yield index (TYX) climbed 2.1% for the week, its worst performance in over three years. The selloff extended globally, with German bund yields rising 15 bps and Japanese government bond yields up 10 bps amid flight-to-safety pressures. Market participants are now pricing in a higher probability of inflation persistence. With oil contributing directly to headline CPI pressures, the bond market has priced in a 60% chance of a Fed rate hike in May, up from 35% at the start of the week. The CBOE Volatility Index (^VIX) surged to 34.2, its highest level since the 2023 escalation, reflecting growing uncertainty across equities, fixed income, and commodities. The selloff has widened spreads on high-yield bonds and increased funding costs for corporate borrowers, especially in energy and defense sectors. Energy firms with significant exposure to global supply chains face rising financing costs, while defense contractors are experiencing heightened volatility due to shifting risk assessments. The Federal Reserve’s next policy meeting is now under intense scrutiny, with market expectations shifting toward a more hawkish stance.