US treasury yields rise as Trump warns Iran over Hormuz deadline

US Treasury yields edged higher on Tuesday after President Donald Trump warned Iran to reopen the Strait of Hormuz by an evening deadline, threatening attacks on key infrastructure if Tehran failed to comply.

The warning added a fresh geopolitical premium to bond markets already on edge from rising oil prices and an intensifying standoff in the region.

Treasury yields move higher amid Middle East risk

The 30-year Treasury yield rose 1 basis point to around 4.90%, while the 2-year note — more sensitive to near-term policy expectations — added 1 basis point to about 3.86%.

The moves were modest but directionally consistent with a market reassessing the duration of the Iran conflict and its implications for inflation and Federal Reserve policy.

Bond yields move inversely to prices.

Trump also said it was “highly unlikely” he would extend his diplomatic deadline with Tehran, warning of sweeping consequences for Iran’s infrastructure if no agreement is reached.

Iran rejected a temporary ceasefire proposal, with officials indicating that only a more permanent settlement would be acceptable.

Energy prices climb ahead of deadline

Brent crude climbed above $111 a barrel as the deadline approached, reflecting persistent concern about the security of oil flows through the Strait of Hormuz.

US crude added roughly 2%, trading at its highest level in months.

The advance came as economists weighed the inflationary impact of higher energy prices and as the standoff between Washington and Tehran showed no sign of resolution.

Recent data offers a counterpoint

Away from geopolitics, recent US economic data has pointed to continued underlying resilience, even as analysts warn that sustained energy price increases could begin to weigh on growth in the months ahead.

Federal Reserve officials are due to make policy comments in the sessions ahead, and their language on inflation — particularly as it relates to the oil price surge — will be closely parsed by bond markets.

The trajectory of yields will hinge on two variables: whether the Hormuz standoff produces a military escalation or a diplomatic breakthrough, and whether incoming economic data, including labour market and inflation readings, gives the Fed grounds to hold or adjust its rate path.