Treasuries fall as rising oil prices raise inflation fears and rate hike bets

US Treasury prices dropped sharply on September 9 as surging oil prices reignited inflation concerns. The two-year yield climbed to 4.42%, up 3 basis points and its highest reading since July 2024, while the ten-year yield hovered near 4.81%. The catalyst is crude oil. Brent briefly topped $100 per barrel for the first time since July, while West Texas Intermediate approached $95. Both benchmarks moved sharply higher following US airstrikes on Iranian oil tankers, an escalation in Middle East tensions that threatens to constrain global supply. This isn’t the first oil shock of 2026. Back in March, crude spiked to $126 per barrel before pulling back as diplomatic channels briefly cooled tensions. That episode pushed inflation expectations higher and complicated the Federal Reserve’s messaging for months. The current surge arrives just ahead of the September FOMC meeting. Traders have responded by increasing the odds of a Federal Reserve rate hike. Fed Chair Kevin Warsh has made it clear that bringing inflation to heel remains the central bank’s top priority. Warsh has also pointed to other inflationary pressures beyond oil: tariffs continue to push up import costs across multiple ca...