US-Iran Confrontation Drives Oil Prices Higher Amid Global Market Volatility

Oil prices surged more than 2% in the latest session and have gained roughly 10% this week following an escalation of Middle East tensions, which has prompted investors to increase bets on further interest-rate hikes.

The renewed confrontation between the United States and Iran comes after weeks of relative calm, during which diplomatic efforts failed to produce a breakthrough. Washington has warned of pursuing measures aimed at imposing severe economic pressure on Tehran.

Investor concerns have intensified over the potential economic fallout from disruption in the Strait of Hormuz, a critical global energy route through which roughly one-fifth of the world's oil and gas supplies transit. With the waterway expected to remain severely disrupted for the foreseeable future, markets are increasingly pricing in prolonged pressure on energy costs and renewed inflationary risks.

UK borrowing costs have climbed sharply, with the 30-year gilt yield reaching its highest level since 1998. Japan's 10-year government bond yield has reached a three-decade high, while the yield on 30-year US Treasuries is approaching its 2007 peak. The benchmark US 10-year yield has likewise moved into territory associated with the financial crisis.