Oil Price Surge Fuels Bond Sell-Off, Stocks Plummet

US government bonds experienced a sell-off on Tuesday as rising oil prices and persistent inflation worries drove bond yields higher. This development weighed down stocks on Wall Street, with the S&P 500 falling by 0.5%.

The yield on the 10-year Treasury rose to 4.76%, impacting mortgage rates, while the yield on the 2-year Treasury increased to 4.37%. This rise in yields indicates that investors are demanding a higher return from Treasurys due to growing government debt and increasing risk.

Oil prices have been a significant contributor to inflation anxiety, with Brent crude rising by 2% to $92.33. The ongoing US war with Iran has led to high and volatile energy costs, driving up the cost of goods and services, including gasoline and shipped items.

The Federal Reserve is expected to raise interest rates before the end of the year to combat inflation, which currently exceeds a 3% rate.