Oil Surges Over 5%, Treasuries Sold as Iran Halts US Talks Over Israel’s Lebanon Actions

Oil prices surged over 5% and US Treasuries sold off on Monday after Iran suspended indirect nuclear talks with the US, citing Israel’s military operations in Lebanon, sinking hopes for a Strait of Hormuz deal and rekindling inflation fears. Brent crude August futures rose 5.41% to $96.05 a barrel, while West Texas Intermediate for July gained 6.25% to $92.82. The 10-year Treasury yield ticked up about 6 basis points near 4.5%, and the 2-year yield rose about 6 basis points to 4.07%, while traders boosted Federal Reserve rate-hike bets. Market pricing fully reflects a rate increase by March 2027, with a 50% chance as early as October 2026. “The market was very much of the view that a deal was all but done, so any negative headline is going to be very impactful,” said Gennadiy Goldberg, US rates strategist at TD Securities. Iran’s Tasnim news agency reported the pause was due to Israel’s actions in Lebanon, imperiling negotiations that had aimed to reopen the critical shipping choke point.