Treasury Yields Climb as Oil Prices Surge Amid Renewed Iran Conflict

On Thursday, U.S. Treasury yields moved higher across the curve as Brent crude futures rose above $100 per barrel. The 2-year note rose 6 basis points to 4.364%, the 10-year benchmark gained 5 basis points to 4.71% (its highest level since January 2025), and the 30-year bond reached 5.185%. The oil rally followed reports of Houthi rebel attacks on tankers off Saudi Arabia’s Red Sea coast and renewed U.S. threats to expand strikes against Iran. Jobless claims for the week ended July 18 fell to 187,000, well under the 212,000 economists had expected. Defense Secretary Pete Hegseth said the war with Iran has already cost the United States $37.5 billion.

CNBC

FedWatch data show an 82% probability, according to CME, that the Federal Reserve will raise rates at its September meeting, up from 52% a week earlier. CNN reported a 36% chance of a hike at the next policy meeting, reflecting divergent market views. The market is also reacting to the recent appointment of Kevin Warsh as Fed chair; analysts cite his approach as a key driver of yield movements. JPMorgan Chase CEO Jamie Dimon warned that rising deficits could push interest rates higher and keep the bond market “rattled.” Capital Economics’ Hamad Hussain noted that without de-escalation of the Middle-East conflicts, oil-price risks remain skewed to the upside.

CNN

Two outlets present different expectations for the upcoming Fed decision: CME’s FedWatch tool, cited by CNBC, indicates an 82% likelihood of a September rate hike, while CNN cites a 36% probability for the next meeting. The sources do not reconcile this gap, leaving the market’s near-term rate outlook uncertain.

CNN

• “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,” — Chris Rupkey, FWDBONDS chief economist

CNBC

• “That’s probably the biggest driver as of right now, the Kevin Warsh story and how he approaches his position as Fed chair,” — Tom Tzitzouris, head of fixed income research at Baird Strategas

CNN

• “That will exhibit itself with higher interest rates, the market getting rattled a little bit, people talking about constantly remember the bond market, the bond market vigilantes,” — Jamie Dimon, jpmorgan chase CEO

CNN

• “Unless signs of de-escalation across the various conflicts emerge, the risks to oil prices are skewed to the upside,” — Hamad Hussain, climate and commodities economist at Capital Economics

CNN