Two-year Treasury notes sold poorly at auction, driving yields sharply higher as investors fear prolonged Middle East conflict will fuel inflation. The Treasury Department sold just $9.0 billion of notes, far below the $12.0 billion expected, causing the benchmark yield to jump by 0.06 percentage points to 4.12%. This weak demand signals growing concerns that escalating oil prices from the war could reignite inflation, pressuring the Federal Reserve to maintain higher interest rates for longer.

The poor auction result reflects investor anxiety over the economic outlook, potentially impacting borrowing costs for businesses and consumers across the US.