Bond yields climb amid continuing uncertainty over war timeline
Bond market volatility flared again on Wednesday as fresh attacks on commercial shipping near the Strait of Hormuz rattled investors and pushed US Treasury yields higher in early trading.
Maritime security agencies reported that three cargo vessels were struck by projectiles in separate incidents near or just beyond the Strait, one of the world’s most important oil chokepoints.
Concern over an escalation in the ongoing war pushed 10-year US Treasury yields, which strongly influence mortgage rates, higher on Wednesday. After starting the day just above 4.14%, those yields had jumped close to 4.20% at the time of writing.
That could put further upward pressure on mortgage rates, which have already ticked back above the 6% mark in recent weeks after the beginning of the war.
One of the ships attacked on Wednesday caught fire and had to be evacuated, while others reported hull damage but no loss of life, according to updates from the UK Maritime Trade Operations (UKMTO) and regional authorities.
Other reporting has identified a Thai‑flagged bulk carrier among the most seriously damaged vessels, with most of its crew rescued to Oman and a small contingent remaining on board.
The attacks come against the backdrop of an intensifying US‑Israel war with Iran that has already seen repeated strikes on shipping and energy infrastructure in and around the Gulf.
Iran’s military leadership has publicly warned that ships and oil cargoes linked to the US, Israel or their allies are now considered legitimate targets in the Strait, underlining the risk that a series of sporadic incidents could evolve into a more sustained disruption of global energy flows.
The combination of genuine supply‑disruption risk and large‑scale emergency stock releases has produced a whiplash effect in oil and, by extension, in inflation expectations. Brent remains roughly 20% higher than it was when hostilities began in late February, even after pulling back from early‑week peaks.
And while a Bureau of Labor Statistics report released on Wednesday showed that inflation held steady at 2.4% last month, that marks the last data set from the period before the US launched its war on Iran on February 28.
Soaring oil prices have sparked fears of an inflation spike, a development that would likely put Federal reserve interest rate cuts on the backburner and could even bring a hike into view.
The conflict has also fueled concerns of global stagflation: rising inflation even while economies stall or regress in 2026.
Still, some good news for the US housing sector: mortgage shoppers shook off concerns about the escalating conflict last week as mortgage applications increased by 3.2% compared with the week before, according to the Mortgage Bankers Association (MBA).
That arrived despite a jump in the average 30-year fixed rate to 6.19% and largely flat refinance performance.
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