Treasuries softened Monday as geopolitical risks resurged, with benchmark 10-year yields falling 4 basis points to 4.25%. The move followed the U.S. Treasury Department's seizure of an Iranian oil tanker off the coast of Oman, reigniting concerns about prolonged disruptions in oil supply chains. Brent crude futures jumped 1.8% to $82.50 a barrel, reflecting market jitters over potential Middle East instability.

The conflict-driven volatility mirrors last year's pattern where ceasefire agreements temporarily eased energy markets before recurring flare-ups triggered price surges. While the seized vessel carried only 200,000 barrels of crude, traders fear similar incidents could escalate tensions between Iran and regional adversaries. Analysts note this marks the third major maritime seizure in the Strait of Hormuz corridor this month, disrupting 20% of global oil shipments.

Investors are recalibrating portfolios amid uncertainty. Energy stocks like Exxon Mobil (+2.1%) outperformed broader markets, while Treasuries' flight to safety reversed as risk premiums widened. The yield curve steepened 15 basis points as Fed officials hinted at maintaining higher rates through 2024 despite economic slowdown signals.

Market watchers will closely track OPEC+ production compliance and U.S.-Iran diplomatic channels in coming days. A concrete indicator to monitor: whether Iranian oil exports rebound above 2.5 million barrels daily, a threshold critical to stabilizing energy markets.