(Updates with latest market activity throughout)

By Matt Tracy

WASHINGTON, March 27 - U.S. Treasury yields rose on

Friday as uncertainty persisted around the Iran war and elevated

energy prices.

The yield on benchmark 10-year Treasury notes ticked

up and was last up 2.8 basis points at 4.444%. Yields had

earlier reached as high as 4.482%, their highest since July.

Yields on 30-year Treasury bonds also rose on Friday

and at one point were just shy of 5%. They were last up 4.9 bps

at 4.985%.

The selloff in Treasuries comes as energy prices remained

elevated despite U.S. President Donald Trump on Thursday

extending a pause on energy infrastructure strikes against Iran.

The Strait of Hormuz, through which a fifth of global energy

supply flows, has remained closed throughout the war. Options

markets have bet that Brent crude will reach an all-time high of

over $150 per barrel by the end of April.

Elevated oil prices have raised concerns of persistent

inflation, with U.S. rate futures beginning to price in the

possibility of an interest-rate hike from the Federal Reserve

later this year.

Markets last priced in a 95.9% chance of no hike at the Fed's

April meeting and a 22.6% chance of a 25 bp hike by the end of

the year.

Two-year U.S. Treasury yields, a key indicator of

Federal Reserve interest-rate expectations, were last down 6.6

basis points at 3.918%. They earlier climbed to 4.027%, their

highest since June.

"The lingering threat of inflation is what is on investors'

minds," said Sean Simko, head of fixed-income portfolio

management at SEI Investments.

"The longer the Iran conflict continues and carries on, the

higher the probability of increased inflation and the

expectation for higher yields," he said.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was last at 52.4 basis points.