US bond market rattled as 10-year Treasury yield tops 5% for first time since 2007

Rising oil prices amid war-like conditions between the United States and Iran are now being felt in the US bond market. The yield on the US 10-year government bond has crossed 5 percent, its highest level since the 2007 global economic crisis.

Investors in the market believe the Federal Reserve may raise interest rates under pressure from rising inflation.

The ongoing war in the Middle East has increased pressure on the supply of crude oil. This is pushing oil prices up again, creating a fresh inflation challenge for the US economy. Rising oil prices have a direct impact on petrol, diesel, transport and production costs.

This can directly affect consumer spending and companies' production costs. This is why investors are worried about inflation rising further. This concern is driving heavy selling pressure in the bond market.

The yield on the US 10-year Treasury bond reached 5.02 percent on Tuesday. It later also touched around 5.04 percent. This is the highest level seen since 2007. A rising bond yield means the cost of borrowing for the government goes up. This could eventually also affect the cost of corporate debt and consumer loans. As a result, there are concerns of rising interest rate pressure on the US economy.

Rising oil prices and inflation pressure have put the Federal Reserve in a difficult position. Market trading signals suggest the Fed may raise interest rates. A rate hike could help control inflation, but it could also make borrowing costlier and put pressure on economic growth. This is why the Fed's upcoming decision is being seen as important not just for the US, but for markets worldwide. This rise in US bond yields could also affect the stock market, the dollar and debt markets in other countries.