Treasury yields rise as oil jumps on Middle East conflict

The U.S. 10-year Treasury yield rose to 4.73%, up from 4.66% in the latest reading and well above the 4.07% forecasted level in the data set. The 10-year/2-year yield spread sits at 41 basis points, a sign the market still expects slower growth ahead even as near-term inflation risks intensify.

Crude oil has also surged, with West Texas Intermediate at $136.99 a barrel in the latest data after trading at $83.90 only days earlier, a jump that underscores how quickly the conflict is feeding into commodity markets. That kind of move ripples through inflation expectations, transportation costs and corporate margins, particularly for airlines, shippers and other fuel-intensive businesses.

Bond exchange-traded funds are reflecting the selloff. TLT closed at $82.00, below its 50-day moving average of $83.53 and 200-day moving average of $84.99, while its RSI reading of 48.7 suggests the fund is not yet deeply oversold but remains under pressure. IEF, another broad Treasury ETF, fell to $92.24, also below its 50-day and 200-day averages.

Adalytica’s US Treasury Bonds Trade Signals snapshot shows TLT sentiment at 46, still neutral, with awareness at 56 and a 7-day change of 42. The dollar signal remains neutral as well, while the CPI gauge shows heightened attention to inflation, and confidence in the Fed’s 2% target has surged in the latest reading, highlighting how quickly investors are reassessing the inflation outlook.

For investors, the immediate risk is that a deeper geopolitical shock keeps oil elevated long enough to push inflation expectations higher and delay any easing by the Federal Reserve. That would be negative for bonds, potentially supportive for energy stocks, and a complication for rate-sensitive sectors such as housing, utilities and growth equities.

The next catalyst is whether the Middle East conflict spreads further or eases, and how commodity markets respond in the days ahead. If crude stays near current levels, the bond market is likely to remain on the defensive even if growth data weakens.