A selloff in government bonds has pushed the 10-year Treasury yield close to its 2026 high. Renewed hostilities in the Middle East are driving a prolonged selloff in U.S. government bonds, sending yields close to their highest levels of the year and lifting borrowing costs for businesses and consumers. The yield on the benchmark 10-year U.S. Treasury note—which helps set rates on mortgages and student loans alike—reached 4.665% in late-afternoon trading Wednesday, according to Tradeweb, just under its 2026 intraday high of 4.687% set on May 19.

With rebounding oil prices fueling inflation concerns, rising yields are already pushing up mortgage rates and undercutting the stock rally. Major indexes have mostly treaded water in recent weeks and finished mixed again on Wednesday. Treasury yields are largely determined by investors' expectations for short-term interest rates set by the Federal Reserve. When investors expect those rates to go up, the relative appeal of Treasurys diminishes—causing their prices to fall, and their yields rise to a competitive level again.

The most immediate reason yields are rising is the resumption of fighting between the U.S. and Iran. The resulting rebound in oil prices has renewed worries about the inflation outlook and spurred a shift in interest-rate expectations, as investors bet that the Fed will need to raise rates to bring inflation down. Still, yields have proven to be only loosely connected to oil prices in recent months.