Treasury yields fall as oil prices drop on Iran de-escalation hopes

U.S. Treasury yields fell on August 3, 2026, as oil prices dropped on signals of easing tensions in the Iran conflict. The 10-year yield shed more than one basis point to 4.688%, the two-year lost four basis points to 4.252%, and the 30-year slid over four basis points to 5.226%. (One basis point equals 0.01%; yields move inversely to prices.)

Oil prices slumped after President Donald Trump claimed negotiations with Iran would resume, following a U.S. decision to hold off on new strikes at the request of Gulf allies. Iran's foreign ministry spokesperson Esmail Baghaei, however, told a press conference on August 3 that no direct talks are planned, reiterating that Tehran is currently engaged only in discussions with Oman over the Strait of Hormuz.

The 30-year Treasury yield had surged the previous week to its highest since 2007 after the Federal Reserve voted 9-3 on July 29 to hold its key rate steady in a range of 3.5% to 3.75%. Two of the dissenting officials said on July 31 that they favored rate hikes to combat inflation.

Seema Shah, chief global strategist at Principal Asset Management, said the decline in short-dated yields points to a more dovish near-term policy outlook, but the rise in longer-end yields over the past week signals concern that Fed Chair Warsh may not act aggressively enough if inflation stays elevated. "The bond market is effectively testing the Fed's credibility," she added.

On August 3, investors also awaited the July manufacturing PMI data, due for release at 3:00 p.m. ET.