US Treasury yields sharply increased on Tuesday after investors considered the possibility of elevated inflation after the European Union implemented a gradual ban on imports of Russian oil that has sent crude prices soaring. On Monday, EU leaders agreed in principle to cut 90 percent of oil imports from Russia by the end of the year in what is the toughest sanctions yet from the bloc since February.

The sanctions will be implemented gradually over the next six months and will apply to Russian crude that is delivered by shipments and refined products implemented over eight months.

The ban excludes pipeline oil from Russia in order to concede to Hungary in order to progress with negotiations about sanctions.

Following the statement from the EU, oil prices peaked on Tuesday with benchmark Brent crude rising 0.96 percent to $122.84 (£96.9) per barrel after previously increasing to $124.64 (£98.5), the highest since March 9.

Members of the Organisation of the Petroleum Exporting Countries (OPEC) were reportedly considering suspending a production deal with Russia.

This led to Brent crude contracts for August settling down to 1.7 percent at $115.60 (£91.4) per barrel.

US West Texas Intermediate (WTI) crude also decreased by 0.06 percent trading at $115.02 (£91) a barrel, which reversed previous trading gains.

Managing member at Great Hill Capital said: “Energy is the input cost for basically everything and high oil prices are bad for inflation.”

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This cut the expectation that the Federal Reserve may pause for breath following hikes in June and July.

Benchmark 10-year yields increased to 2.8622 percent while on Wall Street, all three primary indexes closed lower due to healthcare, technology, energy and industrial sectors.

However, the US dollar strengthened on Tuesday across the board as the Treasury yields climbed and concerns about global inflation decreased investor appetite for risk.