Israel's annual inflation rate eased more than expected to 3.1% in May, official data showed on Sunday, although it is still slightly above target and the escalation of the country's conflict with Iran poses additional risks to the outlook.

Israel’s annual inflation rate dropped to 3.1% in May, down from 3.6% the previous month, according to figures released Sunday by the Central Bureau of Statistics. This is the lowest year-on-year rate recorded since June 2024, when inflation stood at 2.9%.

US Treasuries fell as an earlier surge in oil prices fanned concern about inflation, with tensions between Israel and Iran escalating over the weekend. Most Read from BloombergShuttered NY College Has Alumni Fighting Over Its FutureDo World’s Fairs Still Matter?

Treasury yield jumped 6.9 basis points on Friday to $4.426, reversing a dip in the immediate aftermath of the attacks.

Selling pressure on 10-year US Treasuries from the latest round of Israel-Iran conflict is likely to have a lasting effect if past episodes of clashes between the two nations are any guide.

A prolonged Israel-Iran conflict could push oil prices sharply higher, potentially prompting the Federal Reserve to either hasten rate cuts due to an economic slowdown or delay them to combat rising inflation.

The oil price surged more than 7 per cent on Friday after news of the attack hit commodity traders' screens, and any thought of the price staying below $US60 a barrel this year now seems dead.

At least eight people died overnight following Iranian missile strikes on Israel. Israel's defense minister accused Iran of targeting civilians and Iranian officials have also accused Israel of striking civilians.