Oil tops $91 as US-Iran ceasefire expires, bond yields hit multidecade highs

Global markets faced fresh turbulence on Tuesday as the 60-day US-Iran truce expired and Tehran announced it would shift to a "fully offensive" military posture, pushing Brent crude above $91 a barrel and sending bond yields higher across the world.

Truce Collapses, Oil Surges

President Trump told reporters on Monday he was "not interested" in extending the memorandum of understanding signed with Iran in June, effectively ending a diplomatic window that was meant to produce a lasting peace deal. Oil prices rose more than $2 during Monday's US session as traders refocused on global supply risks, with Brent crude futures edging up further to around $91 a barrel as Asian trading resumed early Tuesday.kfgo+2

"Markets adopted a generally risk-off tone as President Trump reaffirmed he was not interested in extending the truce with Iran, with renewed tensions in the Middle East pushing oil prices higher and complicating sentiment," Westpac analysts wrote in a research note.reuters

Bond Yields Hit Multi-Decade Highs

The selloff in global bonds deepened, with the US 30-year Treasury yield climbing above 5.31% — its highest level in more than two decades — while the 10-year yield rose to 4.728%. Japan's 10-year government bond yield hit a three-decade high of 2.945%.kfgo+1

"Typically, moves above 4.65% for the US 10-year have been followed by some soothing words from the Trump administration, typically centred on an imminent resolution to the war with Iran," ING analysts wrote. "This time, we're not hearing the same."reuters

Investors are grappling with surging government spending, a flood of long-dated debt issuance, and inflation that has remained above the Federal Reserve's target for much of the past five years. The anxiety was compounded by soft US economic data on Monday, including an unexpected drop in retail sales.economictimes+1

Asian Stocks Mixed, Dollar Weakens

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3% to 0.8%, while the Kospi surged more than 3% as South Korea's market returned from a holiday. Japan's Nikkei 225 slipped 0.3%, and S&P 500 futures were flat.kfgo+1

The US dollar index fell to a two-month low near 99.5, while gold extended gains to a third consecutive day, trading around $4,420 an ounce. Attention now turns to earnings from Walmart ↘ 0.82%, Home Depot The Home Depot, Inc. ↘ 0.29%, and Target ↘ 2.25% this week, along with the Fed's latest meeting minutes, for further signals on the health of the US consumer.reuters+1