Global Bond Yields Soar Amid Iran Conflict Fears and Inflation Worries
Global government borrowing costs are surging as investors grow increasingly concerned about the impact of rising oil prices and inflation on economies worldwide. The breakdown in US-Iran peace talks has pushed international benchmark Brent crude to nearly $91 a barrel, fuelling fears that energy prices will remain elevated for the rest of the year.
As a result, long-term bond yields across Europe's biggest economies have hit multi-year highs, while the yield on 30-year US Treasuries rose to its highest level in nearly two decades. The European Central Bank (ECB) deposit rate is now expected to reach 2.76% by March 2027, up from 2.25% currently, with investors seeing a 90% probability of a September rate hike.
France's 10-year bond yield rose to 4.10%, its highest level since June 2009, while Germany's 30-year bond yield climbed above 3.78%, its highest in 15 years. The UK's 30-year gilt traded at 5.85%, its highest level since May 2026.
According to Richard Carter, head of fixed interest research at Quilter Cheviot, 'the breakdown in US-Iran peace talks has increased the risk that energy prices remain elevated for the rest of the year, which could keep inflation higher than expected and increase the chance of central banks raising rates.'