Bond Rout Deepens as Oil Prices Surge Past $92

The global bond market is experiencing a rout due to rising oil prices and increased government borrowing costs. The UK's 10-year gilt yield has reached its highest level since June 2008, at 5.223%, while Japan's 10-year yield touched 3% for the first time since September 1996.

The sharp increase in bond yields is attributed to a combination of factors, including the closure of the Strait of Hormuz due to escalating tensions between the US and Iran, which has disrupted oil exports and driven up prices. Brent crude has reached nearly $92 per barrel, putting pressure on inflation and global economies.

The UK government faces a dilemma as higher gilt yields increase debt service costs, but rate cuts may not be feasible given rising oil-driven inflation. The Bank of England and the Treasury must navigate this challenging situation to manage their finances effectively.