Oil Price Surge Sparks Global Bond Yield Hike Fears

Global bond yields surged to multi-year highs as investors reacted to a sharp rise in oil prices, intensifying inflation concerns and prompting central banks to consider further interest rate hikes. The Brent crude price rose to a four-month high of $109.97 per barrel, following a 6% jump overnight, with the market expecting a weekly gain of nearly 13%. Oil flows remained constrained through the Strait of Hormuz due to attacks between the US and Iran, as well as Iran-aligned Houthis taking control of Yemen's port of Mocha.

The disruption to key shipping routes increased fears that the conflict could become prolonged, with risks to oil supplies adding to inflation pressures worldwide. U.S. Treasury yields climbed sharply, with the benchmark 10-year yield rising 2 basis points to 4.9708%, its highest level in three years and just below the closely watched 5% threshold.

The 30-year Treasury yield rose to 5.3803%, its highest level in 19 years, while higher long-term borrowing costs are likely to put further pressure on U.S. mortgage rates and the housing market. Markets were pricing in roughly a 70% probability of a Federal Reserve rate hike this month as policymakers face renewed inflation risks from higher energy prices.