2-Year Treasury Yields Hit 16-Month High as Oil Shock Reprices Rate Expectations

Two-year U.S. Treasury yields reached 4.24% on July 13, 2026—their highest since February 2025—as crude oil spiked amid U.S.-Iran escalation. The move signals markets are pricing less near-term Fed rate cuts than they expected weeks ago, even as oil-driven inflation threatens growth. The question for portfolio managers is whether this reflects a durable shift in rate expectations or a risk premium that reverses if the conflict de-escalates.