US Bond Markets Sell Off As Iranian Drones Hit UAE Fujairah Hub

Brent crude jumped more than 5% on Monday to above $120 a barrel, but US bonds rose sharply as Iranian drones struck the Fujairah Oil Industry Zone, the UAE’s main oil export outlet outside the Strait of Hormuz.

The UAE Ministry of Defence intercepted three of four Iranian cruise missiles, while a fourth fell into the sea. Two passenger flights to Dubai were diverted as alerts spread across the Emirates.

US Bond Market Sends Warning

The 10-year U.S. Treasury yield climbed to 4.46%, a nine-month high as traders price in inflation pressure from rising energy costs.

In bond market language, a sell off means investors are selling bonds, which pushes prices down and yields up. So a bond sell off signals rising yields. They’re the same event described from two angles:

• Price view: bonds sold off (prices fell)
• Yield view: yields surged

Fed funds futures now imply no Federal Reserve rate cuts until December 2027. Traders see a 38% probability of a rate hike by March 2027.

Bonds typically rally on geopolitical risk. Monday’s move suggests markets view sustained inflation as the bigger threat.

“It appears that $5/gallon gas prices and 7%+ mortgages are on the way. The bond market needs help,” wrote analysts at The Kobeissi Letter.

Strike Hits Hormuz Bypass Hub

The UAE ministry of defense indicated detecting four munitions coming from Iran. Reportedly, three missiles were successfully intercepted over the country’s territorial waters, and the last one fell into the sea.

“The Ministry of Defence confirmed that the sounds heard in scattered areas of the country are the result of the successful interception of the aerial threats,” they wrote in a post.

Three Indian workers were moderately injured at Fujairah. A tanker was struck north of the port over the weekend.

Loading operations at the Hormuz bypass hub have been partly suspended after three drone strikes in four days. The attacks broke a fragile US-Iran ceasefire that took effect on April 8.

“Tonight, perhaps, a new chapter of power will unfold, one the adversaries have never witnessed before,” Iranian Brigadier General Ibrahim al-Fiqari warned of further escalation in a post on X.

The Fujairah hub is the UAE’s only major oil export outlet outside the Strait of Hormuz. A pipeline built specifically to bypass the chokepoint feeds it.

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