U.S. Treasury yields moved higher in volatile trading on Thursday as oil prices strengthened after reports that Iran declined a U.S. proposal linked to the Strait of Hormuz.
The yield on the benchmark 10-year Treasury note climbed 3.2 basis points to 4.386% after having fallen earlier in the session to 4.314%, a level that was its lowest since April 27.
Market direction shifted in tandem with energy prices following a Wall Street Journal report that cited a senior Iranian official saying Iran would not permit the United States to reopen the Strait of Hormuz and withdraw from the conflict without receiving reparations. Under usual conditions about one-fifth of the global flow of oil and liquefied natural gas moves through the Strait of Hormuz.
U.S. crude oil registered a modest uptick of 0.02% to $95.10 a barrel, after touching a session high of $97.46 in the wake of the report. Brent crude traded at $100.65 per barrel, down 0.61% despite having climbed to $102.49 the previous day.
Earlier in the session, yields had fallen alongside a marked drop in crude prices as reports emerged that the United States and Iran were considering a limited, temporary arrangement to pause hostilities. Sources and officials described a proposal under review in Iran that would halt fighting for a time but leave contentious issues unresolved.
The interplay between energy markets and U.S. government bond yields underscored how developments around the Strait of Hormuz and the status of talks between Tehran and Washington can rapidly alter risk pricing. Moves in oil influenced investor demand for Treasuries, producing the reversal witnessed during the trading session.
Price swings in energy and government debt highlight the sensitivity of financial markets to geopolitical headlines in an environment where a significant share of global oil and liquefied natural gas transits a single strategic waterway.