Energy Prices Surge, Bond Markets Tumble Amid Central Bank Rate Hike Expectations

A surge in energy prices is adding fuel to selloffs across global bond markets as investors brace for central bank interest rate rises this month.

The Iran conflict continues to escalate, driving crude and natural gas prices higher. U.S. 10-year Treasury yields have hit their highest since 2023, at 4.8%, approaching the 5% level that can be a major challenge to equities for mixed asset portfolio managers.

Central banks are increasingly likely to raise interest rates this month, with the Federal Reserve's Kevin Warsh laying out the case for a hike last week and Centrist Fed board member Michael Barr indicating a rate rise in September may now be necessary.