Oil Price Surges Push 10-Year Treasury Yields Higher and Threaten 2026 Rate Cuts

Fixed-income investors have trimmed bets on Federal Reserve interest rate cuts, sending the 10-year Treasury yield up approximately 36 basis points from 3.962%. The shift follows a rise in Brent crude oil prices to near $90 per barrel. Traders priced in potential supply shortages amid conflict involving Iran, which began after President Donald Trump set a deadline for Iran to reopen the Strait of Hormuz and the U.S. struck military targets on Iran's Kharg Island. Higher energy costs pass through to transport, food production, and manufacturing. US consumer price growth could increase by 0.5 percent to 1 percent if energy prices remain elevated for several months. Austan Goolsbee, head of the Federal Reserve Bank of Chicago, warned that these conditions could create a stagflation-style environment. If higher fuel costs push inflation expectations upward, interest rate cuts expected in 2026 may be delayed.