10-year Treasury yields climbed to 4.13%, their highest level since mid-February, as escalating tensions in the Persian Gulf and rising crude oil prices fueled inflation concerns. The surge was triggered by China's announcement to suspend exports of diesel and gasoline to its largest refiners, a move directly impacting global fuel supplies. This development overshadowed equity market optimism, with TD Securities strategist Prashant Newnaha noting bond markets were reacting more negatively.

Traders are increasingly doubting the Federal Reserve's ability to cut rates soon, with swaps markets pricing in only 41 basis points of cuts by year-end, down from 61 basis points last week. Higher oil prices, particularly Brent crude nearing $85 a barrel, are seen as a major driver, with National Australia Bank strategist Kenneth Crompton stating Treasury yields were "too low to start with" before hostilities began. The Iran conflict shows no sign of easing, with attacks on Israel and Gulf states and retaliatory strikes including the sinking of an Iranian warship. The combination of geopolitical risk and tightening monetary policy is pressuring yields higher, suggesting a potential move towards 4.20% to 4.30% for the 10-year bond.