Rising Middle East tensions and fears of higher oil prices driving inflation are pushing US Treasury bonds toward their longest losing streak in a month. Data show the yield on the 10-year US Treasury note has risen for three consecutive days, increasing by 1 basis point to 4.09%. Oil prices climbed on Thursday, extending gains from the previous session.

According to informed sources, the US military is prepared to launch a military strike against Iran as early as this weekend, although President Donald Trump has not yet made a final decision. Sources indicate that the White House has been informed that, following a significant recent buildup of US forces in the Middle East, military preparations are in place for a potential weekend attack. Trump has privately debated the pros and cons of military action and consulted advisors and allies on the best course—it remains unclear whether a decision will be made before the weekend.

The second round of indirect talks between the US and Iran took place on February 17 in Geneva, Switzerland. Officials from both sides noted after the talks that despite lingering differences, progress was made compared to the previous round, and both parties agreed to maintain contact.

While indirect negotiations continue, the US has been strengthening its military presence around Iran. The USS Gerald R. Ford aircraft carrier and its escort ships are crossing the Atlantic toward the Strait of Gibraltar. Additionally, the US has deployed a large number of fighter jets and support aircraft to the Middle East, assembling the region's largest aerial presence since the 2003 Iraq War.

Evelyn Gomez-Lichty, a strategist at Mizuho International, stated, "If a prolonged US-led operation aimed at regime change unfolds, it could have a larger and more lasting impact on energy markets, challenging the narrative of declining inflation and prompting a reassessment of medium-term inflation risks along the yield curve."

Inflation concerns have become a key focus for investors following the release of the Federal Reserve’s January 27–28 policy meeting minutes, which indicated that the central bank may need to raise interest rates if price pressures remain stubbornly high. The minutes revealed divisions among officials regarding future monetary policy direction.

Some participants suggested that if inflation continues to decline as expected, further reductions in the federal funds rate target range could be appropriate. Others argued that rates should remain on hold while awaiting new inflation and economic data, with some emphasizing that rate cuts may not be suitable until there is clear evidence that disinflation is back on track. A few officials even raised the possibility of renewed rate hikes and called for clearer communication that policy decisions remain two-sided.

Regarding the inflation outlook, Fed officials projected that inflation would move down toward 2%, though the pace and timing remain uncertain. The impact of tariffs on core goods prices may begin to fade this year. Most participants cautioned that progress toward the 2% target could be slower and more uneven than widely expected, and risks of inflation persistently exceeding the target should not be overlooked. Some also noted that sustained demand pressures could keep inflation elevated.

This week, money markets have scaled back bets on Fed rate cuts, now pricing in only about a 25% chance of a third cut this year, down from 50% last Friday. Meanwhile, the yield on the more policy-sensitive two-year US Treasury note has risen to 3.47%.