10-Year Treasury Yield Hits Highest Since Jan 2025 as Brent Oil Surges Above $100 on Inflation Fears

U.S. Treasury yields rose sharply on Thursday, driven by Brent crude oil's climb above $100 per barrel—which reignited inflation concerns—and a surprise drop in weekly unemployment claims below 200,000.

Key Yield Movements

• 10-year Treasury note: Rose more than 4 basis points to 4.699%, after briefly exceeding 4.7%—the highest level since January 15, 2025, before President Donald Trump's second term began.
• 2-year Treasury note: Increased more than 5 basis points to 4.353%.
• 30-year Treasury bond: Rose 2 basis points to 5.167%.

Note: One basis point equals 0.01%. Yields and prices move inversely.

Oil Prices Continue to Climb

Oil markets extended their rally on Thursday, with Brent crude on track for its third-largest monthly gain in the past decade. The surge followed reports of Houthi rebel attacks on tankers off the Red Sea coast of Saudi Arabia and renewed U.S. threats to escalate strikes against Iran.

• Brent crude futures: Rose 7% to close at $100.69 per barrel—the highest since the U.S. and Iran reached a tentative peace deal last month.
• U.S. West Texas Intermediate crude futures: Advanced 6% to $92.19 per barrel.

Fed Rate Hike Expectations Rise

As inflation fears intensified, market expectations for a Federal Reserve rate hike increased sharply. According to CME's FedWatch tool, fed funds futures traders now price in a more than 80% chance of a rate hike at the September meeting—up from 52% just one week ago.

Labor Market Data

Jobless claims for the week ended July 18 came in at 187,000, well below the 212,000 expected by economists polled by Dow Jones.

Investors now look ahead to Friday's S&P Global Flash U.S. purchasing managers index report, which will gauge the health of the American manufacturing and services sectors.

Analyst Commentary

Chris Rupkey, chief economist at FWDBONDS, offered a cautious outlook:

"The economy may be heating up today, but the path ahead for the employment markets could still be rockier with the escalation of the war in the Middle East causing a u-turn in energy prices virtually overnight this week. Half of Federal Reserve officials are concerned enough about the inflation risks to pencil in a rate hike this year, but they still need to keep an eye out for labor market risks where jobs are increasingly hard to get especially for recent graduates."

"The economy isn't out of the woods yet from the dangers posed to either growth or the affordability crisis and higher prices."

Global Bond Market Impact

Government bond yields also rose across Asia and Europe on Thursday. In the U.K., the 10-year government bond yield climbed above 5.1% after new Prime Minister Andy Burnham cut property taxes on hospitality venues, adding to investor unease. Burnham's 20% cut on business rates will cost roughly £100 million ($134 million) and aims to protect pubs, clubs, and music venues from higher costs.

— CNBC's Chloe Taylor contributed to this report.