US Treasury Yields Hit 20 Year High Amid Escalating Middle East Conflict

The yield on the US 10 year Treasury note reached 5 percent on Monday, hitting its highest level since 2007. This surge in yields, which occurs when bond prices fall, has increased borrowing costs for consumers and businesses and put pressure on global equity markets. Analysts suggest the rise is driven by a combination of inflation concerns, rising sovereign debt, and geopolitical instability following the start of a war between the US and Iran on February 28. The US Department of Defense reported that Operation Epic Fury, the military action against Iran, has cost US$ 33.4 billion as of June 29, with goals including the dismantling of Iran's security apparatus and the prevention of nuclear weapons acquisition.

Oil prices have climbed above US$ 100 per barrel, with Brent reaching as high as US$ 108.43 on Tuesday. The price increase follows attacks by Houthi forces in Yemen, who are allied with Iran, against Saudi Arabian energy infrastructure. These attacks disrupted the East West pipeline, which allows Saudi Arabia to export oil while bypassing the blocked Strait of Hormuz. Goldman Sachs noted that the attacks could threaten up to 4 percent of the global oil supply. Meanwhile, the UN reported that the conflict in Yemen has internally displaced more than 100,000 people.

Diplomatic tensions remain high as Iran has denied negotiations with the US unless its demands are met, including the end of the conflict and the lifting of sanctions. US Treasury Secretary Scott Bessent has attempted to calm market concerns through debt buybacks, but yields have remained elevated. In other news, the CPTM in Sao Paulo will reimburse Trivia Trens approximately R$ 24.4 million for management costs following a severe power failure on three train lines in July.