Markets searched for direction this week as a resolution to the conflict with Iran remained elusive. Some investors had been hoping that last week’s U.S.-China summit would yield progress on the Strait of Hormuz, but no breakthrough materialized. Oil thus remained volatile, with Brent and West Texas Intermediate crude sustaining prices above or near the $100-per-barrel threshold. With the inflation outlook increasingly dour, U.S. borrowing costs remained elevated during the week. The yield on the benchmark 10-year Treasury set a new 52-week high as it eclipsed 4.6%. The 30-year yield touched its highest level since 2007. Germany, Europe’s largest economy, saw the yield on its 10-year note rise to levels last observed in 2011. In equities, the S&P 500, which closed at a record high last Thursday, gave back some of its recent gains despite a mid-week rally.

Heightened uncertainty over the duration of the war—particularly the status of the Strait—has dampened a sense of optimism among market participants over a potential peace deal that would free up energy shipments in the Middle East, as well as U.S. growth showing signs of withstanding higher energy costs. The Atlanta Fed’s GDPNow model put the U.S. on course to grow at a 4% annualized rate in the second quarter, based on data as of May 14. The economy grew at a 2% pace in the first quarter, according to the Commerce Department’s advance estimate.

PGIM takes a closer look at the factors pushing rates higher in a new edition of the Weekly View from the Desk.