Global Inflation Fueling Bond Market Rout Amid Escalating US-Iran Tensions
Global inflation remains stubbornly high, putting pressure on bond markets worldwide. Bond yields are soaring to multi-decade highs in several major economies, driven by rising energy prices and intensifying tensions between the US and Iran.
In Japan, the benchmark 10-year government bond yield touched 3% for the first time since 1996, while the two-year yield climbed to its highest level in over three decades. This trend is being mirrored across Europe and the US, with the 10-year Treasury yield rising to about 4.79%, its highest since January 2025.
British government debt has been hit particularly hard, with the 10-year gilt yield climbing above 5.23%, its highest since the 2008 global financial crisis. Germany's 10-year Bund yield also rose above 3.3%, while shorter-term borrowing costs increased in Germany and France as investors reassess the outlook for inflation and monetary policy.
The renewed pressure on bond markets comes amidst escalating tensions between Washington and Tehran, with American strikes on Iranian-held islands near the Strait of Hormuz followed by Iranian missile retaliation. Treasury Secretary Scott Bessent warned that the US will further escalate economic pressure against Iran this week, stating 'This is going to be financial violence if we have to... We are showing people that we know who you are, you know who you are, and this has got to stop.'