Elevated uncertainty drives Treasury yields higher

Heightened geopolitical tensions and the resulting surge in oil prices have significantly reshaped market expectations. Investors are now prioritizing inflation concerns over growth, leading to a notable increase in US Treasury yields as the Federal Reserve's easing path has been largely discounted.

While initial market reactions mirror past oil shocks, modern economies' improved efficiency may temper long-term growth impacts. However, sustained high oil prices could still erode risk asset sentiment.

Despite current uncertainty and divergent negotiation stances, potential for tactical yield declines exists as indirect talks progress or a regional military buildup creates a temporary pause. The Federated Hermes Duration Committee views this environment as an opportunity for a slight increase in portfolio duration, with ongoing monitoring of the evolving situation.