Yield Shock: U.S. Bond Market Jolted by Oil Price Spikes

U.S. bond yields have surpassed 5% for the first time since 2023, driven by spiking oil prices that threaten to spill over into debt markets.

The benchmark 10-year Treasury yield briefly topped 5%, but later pulled back.

The surge in yields comes as the war in Iran enters its seventh month, with little evidence of diplomatic progress towards fully reopening the Strait of Hormuz.

Crude and refined fuel products remain pricey due to ongoing tensions, which have drained U.S. oil reserves to their lowest levels in over 40 years.

The prospect of energy costs staying elevated indefinitely has pushed inflation expectations up, leading to a jump in bond yields across Europe and Asia.