Bond Yields Soar as Middle East Conflict Escalates

Global bond yields rose sharply on Tuesday to their highest levels in decades as escalating Middle East tensions pushed up oil prices and increased concerns about inflation.

The conflict, which saw a jump in oil prices, has added to investors' worries about inflation, making it harder for central banks to ease monetary policy. The bond market sell-off underscores investors' anticipation of higher rates from central banks.

In Japan, the 10-year government bond yield hit 3% for the first time since 1996, while in the UK, the 30-year yield reached its highest level since 1998. Germany's 10-year yield also hit its highest level since 2011.

Oil prices rose sharply on Tuesday, with Brent crude, the global oil benchmark, pushing higher after US officials said forces began striking Islamic Revolutionary Guard Corps (IRGC) targets in Iran at 12 p.m. ET. Brent rose about 4.6% to settle at $94.65 per barrel, its highest settle level in over a month.

Tom Tzitzouris, head of fixed income research at Baird Strategas, wrote that 'the longer the conflict abroad persists, the greater the risk [of] long-run inflation.'