Treasury yields edge lower as investors weigh rising oil price, Iran attacks and looming Fed decision

Treasury yields edged lower Tuesday as investors weighed escalating tensions in the Middle East and rising oil prices ahead of the Federal Reserve's policy decision.

The benchmark 10-year Treasury yield was less than 2 basis points lower at 4.202%, while the 30-year Treasury bond yield was down 1 basis point at 4.848%. The 2-year Treasury note yield fell less than a basis point to 3.674%.

One basis point equals 0.01%, and yields and prices have an inverse relationship.

Oil prices jumped on Tuesday as questions remained over whether a U.S.-led coalition would protect shipping through the Strait of Hormuz. Ship movements through the vital shipping route have plunged after Iranian attacks on tankers, fueling one of the largest disruptions to global oil supply in history. 

International benchmark Brent crude climbed 3.2% to settle at $103.42 per barrel, while U.S. West Texas Intermediate advanced 2.9% to settle at $96.21 a barrel.

The U.S. has urged allies to send naval forces to protect tanker traffic through the Strait. Another tanker was recently struck near the key waterway as a new wave of attacks hit United Arab Emirates' energy infrastructure this week.

It comes after the world's largest ultra-sour gas development was struck by a drone, a fire broke out in the UAE's Fujairah Oil Industry Zone, and another tanker was hit near the strategically vital Strait of Hormuz.

Investors are also turning their attention to the Federal Reserve's second policy meeting of the year, set to conclude on Wednesday. Wall Street is nearly unanimous in thinking the central bank will keep its benchmark lending rate at 3.50% to 3.75%.

"The Fed is in a bind," said Bret Kenwell, U.S. investment analyst at eToro. "Slower growth and a softer labor market would normally argue for easing monetary policy. But inflation remains sticky, while surging oil prices add another layer of uncertainty to the outlook."

Separately, President Donald Trump said Monday the U.S. has asked to delay his planned meeting with Chinese President Xi Jinping in Beijing by "a month or so" due to the ongoing war with Iran.

Trump was expected to travel to China at the end of March for the meeting with Xi.

But when asked in the Oval Office on Monday afternoon if the trip was still on, Trump said: "I don't know, we're working on that right now."