Analysis: Geopolitical tensions are high, and long-term US Treasury yields will remain at elevated levels for a prolonged period of time.

The confrontation between Israel and Iran is driving up the yield on 10-year US Treasury bonds. This has become a recurring theme for investors in the face of escalating tensions in the Middle East, with historical experience indicating that such trends often persist. Recent conflicts between Iran and Israel - including Hamas' attacks in October 2023, Iran's direct strike in April 2024, and another round of escalating tensions in October 2024 - have quickly raised oil prices, reigniting inflation concerns. Brent crude prices briefly exceeded $90 per barrel in April and surged in the days following the two conflicts in October. The 10-year US Treasury bond yield has remained at high levels within 30 days after the most recent direct confrontations between Israel and Iran. During the Arab Spring, oil prices briefly surpassed $100 per barrel and remained high for a long time, with concerns about supply interruptions being a major focus. Concerns about the economic impact of the civil war in Libya initially drove up the yield on 10-year US Treasury bonds - even though the Federal Reserve was in a phase of quantitative easing at the time. As other oil-producing countries gradually filled the supply gap, inflation concerns eased, alleviating upward pressure on bond yields.