U.S. 2-Year Treasury Yield Rises as Oil Prices Exceed $100 Amid Middle East Tensions

The yield on the U.S. 2-year Treasury note added 2 basis points early Wednesday, as oil prices hovered above the $100 mark and inflation fears continued to mount.

The 2-year note — typically more sensitive to near-term policy expectations — was trading at 4.413% shortly after 5:30 a.m. ET.

The yield on the benchmark 10-year Treasury note was unchanged, while longer-dated 20- and 30-year Treasury yields were marginally lower.

One basis point equals 0.01%. Bond prices move inversely to yields.

Wednesday morning saw international benchmark Brent crude futures rise above the $100-per-barrel mark for the first time since late July. U.S. West Texas Intermediate futures also extended gains on Wednesday, adding more than 2% to trade at around $95 a barrel.

The ongoing rally comes amid escalating tensions in the Middle East, with conflict continuing between the U.S. and Iran. Tehran said Wednesday its forces had struck two American vessels and eight oil tankers in the Gulf in retaliation for the U.S. destroying five Iranian crude oil tankers.

"Rates and FX markets are facing an ever more complex environment, with the risks of high energy prices spilling over more broadly in inflation terms, but in turn also increasing the risks of growing headwinds to growth, and demand destruction," Marc Ostwald chief economist and global strategist at London's ADM Investor Services, said in a Wednesday note.

Investors are awaiting a series of economic data prints this week for clues on how the U.S. economy is holding up as the war and energy supply constraints drag on.

Wednesday will see the release of ADP employment data, while PPI data is due Thursday and August U.S. inflation data will be released on Friday.