TLDR
- The 30-year U.S. Treasury yield hit a two-decade high of 5.14%, while the 10-year reached 4.62%, its highest in 15 months
- Rising yields are putting pressure on stock valuations, with the S&P 500 trading at 21.3x forward earnings — well above its long-term average of 16x
- Strong Q1 corporate earnings, up 28% year-on-year, are keeping stocks afloat for now
- The Strait of Hormuz closure and Iran conflict are fueling oil prices above $100 a barrel, stoking inflation fears
- Analysts warn equity markets have not fully priced in the risk of a prolonged inflation shock
U.S. Treasury yields climbed to multi-year highs on Monday as global bond markets sold off. Investors are raising concerns that stock markets have not yet accounted for rising inflation risks.
It simply won't stop.
It is Sunday night and the US 10Y Note Yield just casually hit 4.63%, the highest since February 2025.
We are now ~4 basis points ABOVE the high that prompted President Trump's "90-day tariff pause" in April 2025.
This puts the 10Y Note Yield up +70 basis… pic.twitter.com/SGjFmq8ieo
— The Kobeissi Letter (@KobeissiLetter) May 18, 2026
The 10-year Treasury yield rose to 4.62%, its highest level in 15 months. The 30-year Treasury bond yield reached 5.14%, a two-decade high.
The sell-off spread across global markets. German 10-year bund yields rose to 3.18%, while Japan’s 10-year bond surged 13 basis points to 2.74%.
The spike in yields comes as new Federal Reserve Chair Kevin Warsh faces rising consumer prices and higher import costs. Central bankers are now under pressure ahead of a key G7 finance ministers meeting in Paris.
Oil is adding to inflation concerns. Brent crude rose to $111.16 a barrel on Monday, while U.S. West Texas Intermediate traded at $107.56. Both remain elevated due to uncertainty around a temporary ceasefire between the U.S. and Iran.
Why Stocks Are Still Holding Up
Despite the bond market turbulence, U.S. stocks have not collapsed. The S&P 500 is up more than 8% year-to-date, even after a nearly 1% pullback on Friday.
The main reason is earnings. U.S. corporations posted first-quarter profits around 28% higher than a year ago, the largest jump since late 2021.
Portfolio manager Jeremiah Buckley at Janus Henderson pointed to AI-driven productivity gains as a key factor. He said those gains could extend into 2027.
But the S&P 500 is trading at 21.3 times forward earnings estimates. That is well above the long-term average of 16x, raising questions about how much further stocks can rise.
“Traders don’t want to turn bearish if there is a possibility that the Strait of Hormuz situation could be cleared up in just a few weeks’ time,” said Tim Murray of T. Rowe Price.
The Risks Investors Are Watching
Some money managers are not waiting to find out. Paul Karger of TwinFocus said he is holding large positions in cash, gold, and commodities alongside mega-cap growth stocks.
Jack Ablin of Cresset Capital warned that even a few months of delay in reopening the Strait of Hormuz could create “a brand new inflation regime for which investors just aren’t prepared.”
Producer prices posted their largest gain in four years in April. Peter Tuz of Chase Investment Counsel said inflation appears embedded in the economy and could drive markets lower if it persists.
Capital Economics warned clients that equity markets are not pricing in the risk of a prolonged Hormuz shutdown the way bond markets are.
Matthew Gertken of BCA said the Iran crisis has the potential to reshape market direction for the rest of the year.
The situation remains fluid. With oil above $100, bond yields at multi-year highs, and the Iran ceasefire still fragile, markets face a tense few weeks ahead.
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