Indian government bond yields settled higher for the third straight week as escalating tensions in the Middle East and worries around the timing of U.S. rate cuts pressured investor sentiment.

The yield on the benchmark Indian 10-year note ended at 7.2278% on Friday, after closing at 7.1905% in the previous session. The yield ended the week 5 basis points (bps) higher compared to a rise of 6 bps last week.

The 10-year bond yield ended at a three-month high on the day, tracking a rebound in oil prices, which jumped in reaction to reports that Israeli missiles had struck a site in Iran, sparking concerns that oil supply could be disrupted.

"The negative global developments have weighed on market sentiment. Middle East tensions affecting oil prices and strong U.S. data suggesting fewer and delayed Federal Reserve rate cuts are pushing local yields higher," said Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank.

"The 10-year benchmark yield will find a strong resistance at 7.25% even if the geopolitical tensions continue to hurt."

Higher oil prices spike India's retail inflation as it is a major oil importer and may make the Reserve Bank of India's (RBI) 4% target more difficult to achieve.

Meanwhile, U.S. yields are expected to end the week higher as investors weighed steady labor market data amid uncertainty around the Fed's timeline for rate cuts.

Fed officials have cited continued strength in the U.S. labor market is a reason to delay cutting rates to avoid a reacceleration of inflation.

Markets are now pricing in a total of 42 bps of U.S. rate cuts by the end of this year, down from more than 160 bps of cuts expected in January, according to the CME's FedWatch Tool, with the first reduction anticipated in September.

(Reporting by Bhakti Tambe; Editing by Sonia Cheema)