By Colin Barr

NEW YORK, July 8 (Reuters) - Treasury yields rose on Wednesday after President Donald Trump said he thought the memorandum of understanding with Iran was over, spurring a sharp rise in oil prices and a broad pullback in stocks and bonds.

The 2-year Treasury note US2YT=RR, most sensitive to market expectations for Federal Reserve rate moves, was up 3.7 basis points to 4.199% while the 10-year Treasury note US10YT=RR was up 3.8 basis points to 4.567%. Rising yields mean falling prices.

The Treasury selloff extended a global bond rout, with the German 2-year note DE2YT=RR rising 7.2 basis points to 2.656% and the German 10-year bund DE10YT=RR up 6.8 basis points to 3.056% after earlier hitting its highest level in a month.

Asked before a NATO summit in Turkey whether the MOU to end the war reached last month was over, Trump said: "It's a very interesting question. To me, I think it's over. I don't want to deal with them."

The comments came after Iran's Revolutionary Guards said they targeted U.S. military sites in Bahrain and Kuwait on Wednesday after the U.S. launched a wave of strikes on Iran in response to attacks on tankers in the Strait of Hormuz. The U.S. also revoked a license allowing Iran to sell oil.

Energy prices jumped, with international benchmark Brent crude <LCOc1> up 4.2% to $77.24 a barrel, the highest in two weeks. Global stocks declined, with the Dax dropping 1.8% in Germany, though U.S. stock futures were only modestly lower, with the Nasdaq on track to open 0.8% lower.

Oil prices have fallen sharply — from as high as $126 a barrel in late April — since the U.S. and Iran reached a deal to end their war in mid-June, which started further talks on a range of issues, such as sanctions, and allowed energy to start flowing through the key Strait of Hormuz.

The developments put markets back in a familiar place regarding the war, with investors struggling to decide how much weight to attach to the developments.

"It goes without saying that the tide change in the oil sector risks fully retracing back to the March/April peaks if the latest escalation leads to attacks on Iranian infrastructure and renewed uncertainty regarding stability in the region," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. "The market is now left to ponder whether the renewed attacks are simply an iteration of the negotiations or if Trump has abandoned the peace talks for the foreseeable future."

Later Wednesday, bond investors will focus at 1 pm EST on a $39 billion auction of 10-year notes and an hour later on the release of the Fed minutes for the most recent meeting.

The comments by Trump sent market rate expectations back up after they declined in recent days following the soft June jobs report. On Wednesday morning, investors were pricing in a 30.5% chance of a rate increase at this month's meeting, up from 26.7% yesterday. For September's meeting, rate-hike odds were up to 66.4% from 64.1%, per CME Fed Watch.

"Aside from the comments related to interest rate policy, we’ll be looking for insight regarding the Fed’s effort to message continuity in balance sheet policy at the June 17 meeting," Lyngen said.