The last time the yield on the 10-year Treasury note rose above 5%, the U.S. economy was dealing with pandemic aftershocks. This time, the main culprit is a war with no clear end in sight.

Escalating fears over energy prices and inflation drove the 10-year yield above 5% Monday, a pivotal milestone that is forcing investors to confront whether the bond market is entering a new era.

The answer is set to have sweeping implications for consumers and businesses alike-and could end up playing a role in the coming midterm elections. The yield on the 10-year Treasury is a critical driver of interest rates throughout the economy, and its recent rise has already pushed mortgage rates back up toward 7%. Treasury Secretary Scott Bessent has been taking extraordinary measures to contain yields, with little to show for it so far.

Now, traders are questioning whether 5% will be a ceiling for the 10-year yield, as it was in 2023, or whether the yield will decisively break through that threshold, creating a borrowing environment more like that of the 2000s, when the yield occasionally spent months above 5%. Some are even thinking about the 1990s, when the yield spent years at that level.

Higher yields, in the long run, would significantly drive up borrowing costs for the U.S. government, which already spends more on interest than on national defense.

"Today's number should scare Congress," Rep. David Schweikert (R., Ariz.), who is leaving the House after this year, wrote on social media on Monday.

Treasury yields, which rise when bond prices fall, edged higher in early trading Monday as oil prices climbed again, pushing the 10-year yield above 5% shortly after 10 a.m. ET. The yield reached as high as 5.012%-its highest intraday level since 2007-before ultimately settling back down at 4.960%.

That reversal echoed what happened on Oct. 23, 2023, when the 10-year yield also reached 5% in the morning, before plunging back to just above 4.8% by the end of the session-a sign investors were waiting for the milestone to be hit before rushing in to buy bonds.

Still, Monday's reversal wasn't as pronounced, and many investors say they have reasons to believe that the 10-year yield could easily keep climbing beyond 5% in the coming weeks and months.

To start, investors are much more optimistic about the economy's strength, and think it can handle a 5% yield without quickly decelerating. Many also feel that inflation will remain elevated, especially with tensions in the Middle East driving oil prices above $100 a barrel.

"I'm always asking myself, like, 'OK, what would be a catalyst for rates to go lower?' And it's hard to find one other than the good old-fashioned recession," said Greg Peters, co-chief investment officer at PGIM Credit. "The conditions are very much in place for a higher or remaining-to-be-high yield environment."

President Trump has repeatedly called for the Fed to cut interest rates, putting Fed Chairman Kevin Warsh in an awkward spot as expectations for a rate increase have climbed. Following a firm inflation reading on Friday, investors overwhelmingly expect the central bank to raise short-term rates at its meeting Wednesday, and then to keep raising them after that. Investors' expectations for short-term rates play a major role in determining the level of yields.

For much of the past few years, the 10-year yield has hovered between 4% and 5%. It dropped below 4% just before the U.S. and Israel first launched strikes at Iran at the end of February. But it has generally been climbing since, as Iran's subsequent efforts to throttle shipping through the Strait of Hormuz has driven up energy prices and fueled bets on rate hikes.

Brent crude, the international benchmark, surged nearly 9% last week after Iran-backed Houthi militants took effective control of another shipping chokepoint off Yemen's west coast. It gave up some early gains but still edged up 1% to $105.68 a barrel Monday.

In the view of some investors, the recent rise in yields has to some extent reflected a normalizing economy-a return to a pre-2008 financial crisis world before the era of central-bank bond buying and ultralow rates that defined the 2010s and early 2020s.

The current moment is also unique, however.

Gross federal debt recently hit $40 trillion, around double its level from a decade ago. Increasing federal debt translates to a larger supply of Treasurys, potentially pushing prices down-and yields higher. Led by Bessent, the Treasury Department recently started increasing buybacks of longer-term debt. But those purchases are still very small relative to the total amount of Treasurys.

Many analysts also say that a booming stock market, fueled in large part by investor enthusiasm over AI, is helping offset the economic pinch of higher yields.

Normally, higher yields and borrowing costs might slow business investment. But many tech companies now see investing in AI as an existential matter. "I don't think they respond to financial conditions the same way that other businesses might," said Eric Winograd, chief economist at AllianceBernstein.

Some still believe the Fed could actually contain longer-term yields by following through on expected rate hikes.

"If the Fed ends up hiking this week and delivering a message that they're going to do what it takes to get inflation under control, that, we think, actually can help bring longer-term rates down," said Meghan Swiber, senior U.S. rates strategist and Bank of America.