Yields on 10-year U.S., German and U.K. government bonds rose sharply on Wednesday, hitting four-week highs, after U.S. President Trump said that the ceasefire with Iran is over.
Trump's announcement accelerated an earlier selloff in bonds sparked by renewed military escalation in the Middle East, which pushed oil prices higher.
"For me, I think the deal is over, I don't want to deal with them anymore," Trump told reporters at a NATO summit in Ankara, Turkey, on Wednesday.
The U.S. earlier responded to Iran's recent attacks on ships near the Strait of Hormuz with airstrikes and blocked its ability to sell oil legally. Iran responded with counterattacks, according to a senior U.S. official, threatening to unravel an interim peace deal and drive up oil prices.
"It serves as a reminder of the fragility of the talks as well as underscores how deep the water between the parties still is," analysts at KBC Bank said in a note.
The 10-year U.S. Treasury yield rose 5 basis points to 4.581%, Tradeweb data showed. The 10-year German Bund yield rose 8 basis points to 3.068%, while the 10-year U.K. gilt yield jumped 13 basis points to a high of 4.957%. The price of a barrel of Brent crude oil rose 6.4% to $78.93 per barrel.
Renewed escalations in the Middle East and higher oil prices could reignite concerns over inflation, potentially reinforcing expectations of interest-rate hikes by the Federal Reserve and the European Central Bank, which could lift bond yields further.
"The escalation follows renewed attacks on shipping routes around the Strait of Hormuz, turning what had been a fading risk premium back into a live inflation shock," Patrick Munnelly, market strategist at Tickmill Group, said in a note.
Higher oil prices also mean that "the likes of the ECB can't lower their guard just yet," KBC analysts said.
Eurozone money markets now fully price a 25 basis-point rate hike from the ECB in October, LSEG data showed.
"The feed-through to rates via front-end pricing is clear," Michiel Tukker and Benjamin Schroeder, senior rates strategists at ING, said in a note.
If nothing else, the latest events serve as a reminder that the memorandum of understanding that was signed between the U.S. and Iran in late June "was simply an agreement to talk about talks," analysts at First Abu Dhabi Bank said in a note.
"It was not a concrete ceasefire agreement," they said.
The U.S. dollar also turned higher. The DXY index, which measures the dollar's value against a basket of currencies, rises 0.2% to 101.239. The dollar benefits from safe-haven flows and higher oil prices due to America's position as a net oil exporter.
Write to Emese Bartha at emese.bartha@wsj.com
(END) Dow Jones Newswires
July 08, 2026 05:29 ET (09:29 GMT)
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