Oil prices climb, bond yields rise as US-Iran ceasefire expires

SINGAPORE — Oil prices crept higher and bond yields rose, blunting paltry gains for stocks at the start of Asian trading on Tuesday as a US-Iran truce expired and Tehran said it would shift to a "fully offensive" military posture.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.8%, buoyed by South Korea's rising more than 3% as the Seoul market returned after a holiday. The Nikkei 225 fell 0.3%, while S&P 500 e-mini futures were flat.

The yield on the US 10-year Treasury bond was up 0.8 basis point at 4.728%. Its 30-year counterpart traded up 0.6 basis point at 5.3146%, its highest in more than two decades.

"Typically, moves above 4.65% for the US 10-year have been followed by some soothing words from the Trump administration, typically centered on an imminent resolution to the war with Iran," ING analysts wrote. "This time, we're not hearing the same," they added. "In fact, the latest indications are for no imminent resolution as the shaky 60-day truce came to an end."

As the recent global selloff in bonds deepened, the yield on the 10-year Japanese government bond rose 2.5 basis points to 2.945%, a three-decade high.

Overnight on Wall Street, the S&P 500 slipped 0.5% while the Nasdaq Composite edged 0.3% lower as soft US economic data, including an unexpected drop in retail sales, prompted markets to scale back bets on an imminent Federal Reserve interest rate move.

"Markets adopted a generally risk-off tone as President Trump reaffirmed he was not interested in extending the truce with Iran, with renewed tensions in the Middle East pushing oil prices higher and complicating sentiment," Westpac analysts wrote in a research note.

The US dollar index, which measures the greenback's strength against a basket of six currencies, traded around a two-month low of 99.527.

Oil prices rose more than USD 2 on Monday as the stalemate in Iran refocused oil traders on global supply worries. Brent crude futures edged up 0.2% to USD 91.06 a barrel as trading resumed in Asia.

Gold was up 0.1% at USD 4,420.07, extending recent gains into a third consecutive day.

In cryptocurrencies, bitcoin was up 0.1% at USD 64,398.48, while ether gained 0.3% to USD 1,911.40.

(Reporting by Gregor Stuart Hunter; Editing by Sonali Paul)