Global Bond Selloff Resumes as Oil Prices Soar

A global bond selloff has resumed as surging oil prices amplify fears of rising inflation. The cost of a barrel of oil jumped 6% to above $107 on Thursday amid concerns that advances by Houthi rebels along the Red Sea coast in Yemen could choke off Saudi crude exports.

The global bond selloff, which had previously rocked markets in recent weeks, resumed in response to the news from the Middle East. This came against a backdrop of escalating concern about out-of-control government borrowing.

Higher oil prices are expected to drive up inflation, prompting central banks to raise interest rates and putting the brakes on economic growth. The European Central Bank (ECB) raised its main interest rate to 2.5% on Thursday, with President Christine Lagarde stating that 'inflation will be longer lasting than we had anticipated.'

The ECB president added that 'the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.' The selloff gathered pace in London, with the yield on 10-year UK government bonds surging above 5.37%, the highest cost of borrowing since 2007.