US Treasury Yield Tops 5% as Energy Outlook Darkens

The US 10-year Treasury yield surpassed 5% for the first time since 2023 on Monday, driven by the escalating Middle East conflict and its impact on oil prices.

The upward pressure on yields comes as policymakers have shifted to a more hawkish stance in response to successive energy supply shocks. This shift has led to an increase in expectations of a rate hike at the upcoming Federal Reserve meeting this week, with probabilities now above 90%.

The European Central Bank (ECB) raised interest rates last week, and traders expect the Bank of Japan to follow suit on Friday. The widening conflict in the Middle East has pushed oil prices higher, cementing the central banks' decision to adopt a more hawkish posture.