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?

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.

Investors are closely watching the latest updates in the hostilities between Israel and Iran to gauge how the situation might affect oil prices, as a rise in crude could put more pressure on inflation.

The Federal Reserve and Bank of England are among the central banks due to meet in the coming days as Israel’s attack on Iran adds to a series of geopolitical shocks, including Donald Trump’s trade war, that are clouding the outlook for growth and inflation.

Uncertainty over tariffs had already led the central bank to adopt a wait-and-see approach to interest-rate decisions.

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.

Israel's 12-month inflation rate decreased to 3.1 percent in May, down from 3.6 percent in April, according to data issued Sunday by the Central Bureau of Statistics.

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.