LONDON, March 27 (Reuters) - Yields on benchmark 10-year

U.S. Treasuries rose to their highest level since July on Friday

as markets grappled with the fallout of the Iran war, after U.S.

President Donald Trump's extension of a key deadline failed to

soothe energy prices.

The yield on 10-year Treasury notes rose to

4.464%, up 4 basis points, after jumping 9 bps the previous day.

Yields rise as prices fall and vice versa.

Bonds have been hammered as a spike in energy prices has

caused traders to abruptly scrub out their bets on Federal

Reserve rate cuts this year.

Money markets were last pricing in about a 75% chance of the

Fed raising rates in 2026, according to LSEG data, a dramatic

reversal from before the war in late February when two cuts were

expected.

Trump said on Thursday he would again extend the deadline

for Iran to reopen the Strait of Hormuz or face attacks on its

energy plants, just after U.S. stocks closed out their biggest

one-day fall since the war began.

Yet oil prices continued to rise on Friday as markets faced

the reality that the Strait - through which 20% of global energy

typically flows - remained closed and the war continued to rage.

"While the delay might reduce some of the immediate

escalation risk, it offers no new visibility on the path towards

resolution given Iran's denials over talks," said Jim Reid,

global head of macro research and thematic strategy at Deutsche

Bank.

A Wall Street Journal report that the Pentagon is looking at

sending up to 10,000 additional ground troops to the Middle East

added to concerns that the war could drag on or even intensify.

WTI crude oil, the U.S. benchmark, was last up around

2% at $96 a barrel. Global benchmark Brent crude was up

a similar amount at $110 a barrel.

Two-year U.S. Treasury yields, which are

sensitive to Fed rate expectations, climbed 4 bps to 4.027%, the

highest since June.

Thirty-year U.S. yields rose by a similar amount

to 4.976%, just shy of Monday's six-month high of 4.984%.

(Reporting by Harry Robertson; Editing by Arun Koyyur)