Indian government bonds fell in early trading on Thursday, with the benchmark 6.48% 2035 bond yield increasing to 6.8929% from 6.8662% the previous day. The decline follows a strong rally, as uncertainty surrounding the ongoing U.S.-Iran conflict continues to affect market sentiment. Brent crude oil prices have stabilized near $95 per barrel, driven by expectations of easing tensions after reports that Iran may allow vessels near the Strait of Hormuz. The White House has expressed optimism about reaching a peace deal, but warned that economic pressure on Iran will increase if it does not comply. Elevated oil prices are particularly concerning for India, which relies heavily on imports for its energy needs. The ongoing conflict has led to increased bond yields and a weakened local currency since it began on February 28. Additionally, traders are preparing for New Delhi's upcoming bond auction, which aims to raise ₹320 billion (approximately $3.43 billion) through the issuance of five-year and 40-year bonds. India's overnight index swap rates also saw an uptick, with the one-year rate at 5.78%.