Treasury yields surge as oil rally stokes inflation fears after Trump revives Hormuz blockade

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1546 ET – Treasury yields rose sharply Monday as oil futures rallied nearly 10% following President Trump's decision to revive the U.S. naval blockade in the Strait of Hormuz.

The June Consumer Price Index (CPI) is due Tuesday and had been expected to reflect a decline in energy costs linked to ongoing peace talks. However, that anticipated decline has been largely reversed by the recent escalation in tensions.

The WSJ Dollar Index rose 0.2%. According to Tradeweb, the one-year yield stood at 4.114%, significantly higher than the Federal Reserve's policy target range of 3.50%–3.75%, reinforcing expectations of potential rate hikes. Fed Chairman Warsh is scheduled for his first congressional hearing on Tuesday.

• 10-year yield: Rose 0.042 percentage point to 4.610%
• 2-year yield: Rose 0.054 percentage point to 4.261% — the highest level since February 2025

Treasurys Selloff Gains Momentum as Trump Revives Blockade

1220 ET – The selloff in Treasurys extended, pushing yields higher, after President Trump revived the U.S. blockade in the Strait of Hormuz and announced a 20% charge on every cargo.

Oil prices and yields had already been rising following weekend hostilities in the region, and the trend gained momentum after Trump's statement. The escalation suggests energy inflation could persist long enough to affect other prices, boosting bets on a Federal Reserve interest rate increase this year.

• Crude futures: Rose 5%
• 10-year yield: Reached 4.598%, on track for its highest settle since May
• 2-year yield: Reached 4.251%, the highest since February 2025
• WSJ Dollar Index: Rose 0.2%

Treasury Yields Rise as Middle East Tensions Cloud Outlook

0914 ET – Treasury yields rose as renewed tensions in the Middle East introduced fresh uncertainties. The U.S. and Iran exchanged fire over the weekend, and crude prices climbed 4%, clouding the outlook for inflation and interest rates.

Fed Chairman Warsh is scheduled to address the House on Tuesday and the Senate on Wednesday. According to a WSJ consensus, inflation data is expected to show a cooling trend. CPI is due Tuesday, followed by the Producer Price Index (PPI) on Wednesday.

• WSJ Dollar Index: Flat
• 10-year yield: Rose to 4.585% from Friday's settle of 4.568%
• 2-year yield: Rose to 4.231% from 4.208%

U.S. Treasury Yields Edge Higher but Off Day's Peaks

1039 GMT – U.S. Treasury yields edged higher but retreated from earlier daily highs, while the dollar traded steady as markets absorbed the prospect of a new phase of military escalation in the Middle East.

"The week ahead now becomes critical because the market needs to know whether the oil shock is feeding into the inflation data or simply tightening financial conditions through sentiment," said Patrick Munnelly of Tickmill Group in a note.

• 2-year yield: Rose 1 basis point to 4.216%, after hitting 4.239% earlier in the day — the highest level since February 2025, according to Tradeweb data
• 10-year yield: Rose 0.2 basis point to 4.570%
• DXY dollar index: Steady at 100.943, after trading higher earlier

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