US Treasury Yields Erase 2026 Gains as Oil Price Surge Triggers Inflation Concerns

As the war triggers a surge in oil prices, investors are panicking over inflation and economic growth risks. The U.S. Treasury market has erased all gains made this year.

A Bloomberg index measuring U.S. debt performance has fallen 1.7% since the end of February, dropping below last year’s closing level. This is due to concerns about stagflation pushing yields higher, forcing Wall Street to revise down its expectations for rate cuts in the coming year.

Morgan Stanley strategist Bradley Tian stated in a report, “Inflation driven by rising energy prices and policy uncertainty continue to put pressure on long-term U.S. Treasuries.”

Since the U.S. attack on Iran, investors have been demanding higher yields to compensate for the resurgence of inflation caused by rising energy prices, which could hinder the Federal Reserve’s rate cuts—even in the face of slowing economic growth. Bonds from the U.S., Japan, and Australia have all declined, and a global bond index has fully given back its gains for the year.

“Geopolitical uncertainty and sharp volatility across various assets may persist in the short term until market confidence is restored as the Iran conflict stabilizes,” said Bob Savage, head of macro strategy at BNY Mellon Markets.