The 10-year Treasury yield climbed as much as 12 basis points to 4.599%, its highest level since May 2025, while the 30-year yield rose 10 basis points to 5.131%, also reaching a one-year high. The short end of the curve was similarly impacted, with the 2-year rate advancing 6.6 basis points to 4.081%, its highest mark since March 2025.

This latest spike in yields coincided with about a 2% rise in oil prices, following statements from both US and Iranian officials that dampened hopes for a swift resolution regarding the Strait of Hormuz. Donald Trump said that his patience with Iran was wearing thin and claimed that, during their talks in Beijing, Xi Jinping had acknowledged the necessity for Tehran to reopen the strategic waterway. Meanwhile, Iranian Foreign Minister Abbas Araqchi stated that Tehran had "no confidence" in Washington, though he expressed a willingness to negotiate should the United States demonstrate serious intent.

Data released this week further fueled market anxiety, as consumer inflation recorded its sharpest annual increase in three years, while producer prices posted their strongest gain in four years, significantly exceeding the consensus.

Against this backdrop, markets are now fully pricing in a Fed rate hike for next March, up from about a 40% probability on Monday and almost zero in late April, according to the CME FedWatch Tool.