Tensions in the Middle East escalate, and the yield on long-term U.S. Treasury bonds surpasses 5%

Military tensions in the Middle East have escalated again, pushing up international oil prices. As a result, on May 4, 2026, the yield on the 30-year U.S. Treasury broke through 5% during intraday trading. The long-term bond yield breaking above the 5% threshold is being interpreted as a market signal: it suggests the market is not only focused on short-term fluctuations, but has begun to worry about future inflation and fiscal burdens.

According to data from the electronic trading platform Tradeweb, around 3:00 p.m. Eastern Time on the afternoon of that day, the yield on the 30-year U.S. Treasury rose by 0.06 percentage points from the previous trading day, reaching 5.02%. At the same time, the yield on the 10-year Treasury was 4.44%, and the yield on the 2-year Treasury was 3.96%, increasing by 0.06 and 0.07 percentage points, respectively. Bond yields and bond prices move in opposite directions: when yields rise, bond prices fall. This kind of movement occurs when investors believe the risk of U.S. Treasuries has increased, or expect interest rates to remain at high levels for a prolonged period.

The direct background for this rise in rates is intensifying tension surrounding the Strait of Hormuz. While the United States carries out operations to help ships trapped in the strait pass through, the United States and Iran have used force near the area, heightening concerns about an escalation of the conflict. The Strait of Hormuz is a key global oil transportation route, so instability in the region triggers an immediate, sensitive reaction in international oil prices. Rising oil prices increase transportation and production costs, which in turn stimulates overall prices. With expectations that inflation may spread again, the market has pushed up long-term interest rates.

Meanwhile, the market is also concerned that if war-related spending increases, the U.S. fiscal deficit and debt burden could be further aggravated. Long-term bond yields often better reflect inflation and fiscal conditions over the next several years to several decades. In recent times, market optimism about the health of U.S. finances has not been as strong as it was in the past. Because the 30-year yield is the benchmark rate for 30-year fixed-rate mortgages and high-quality corporate bonds in the United States, the rise in this yield is not only a problem within financial markets—it could also affect everything from household loan interest rates to corporate financing costs. In a recent investor report, Michael Harnett, Chief Investment Strategist at a U.S. bank, treated the 5% level for the 30-year Treasury yield as an important critical point, and that is also part of the reason.

The outlook for monetary policy is also adding additional pressure to the bond market. Against the backdrop of a possible change in the Federal Reserve Chair, the market’s expectations for rate cuts during this year are actually lower. According to the FedWatch tool of the Chicago Mercantile Exchange, the interest-rate futures market shows that, as of the Federal Open Market Committee meeting in December, the probability of rates being kept unchanged or rising is 96%. In short, the market is pricing in, at the same time, Middle East risks, the rise in oil prices, fiscal burdens, and the possibility of rate cuts being delayed. If this trend continues, and if geopolitical conflicts become prolonged or international oil prices remain high, it could lead to further upward pressure on long-term U.S. interest rates.