Global bond markets came under renewed pressure on Friday as a sharp rise in oil prices intensified fears that central banks may need to keep raising interest rates to contain inflation.
Brent crude jumped by about 6% overnight, reaching a four-month high of $109.97 a barrel, as oil shipments remained restricted through the Strait of Hormuz amid escalating attacks involving the United States and Iran. Iran-aligned Houthi forces also took control of Yemen’s port of Mocha, increasing concern over Saudi exports and shipping through the Red Sea. ([investing.com](https://www.investing.com/news/economy-news/global-bonds-fall-as-surging-oil-prices-inflame-inflation-risks-4897139))
The renewed energy shock pushed government borrowing costs higher across major markets. The US 10-year Treasury yield approached the critical 5% mark, while the 30-year yield climbed to its highest level since 2007. Two-year yields also rose sharply as traders increased bets that the Federal Reserve could raise interest rates at its September meeting. ([investing.com](https://www.investing.com/news/economy-news/global-bonds-fall-as-surging-oil-prices-inflame-inflation-risks-4897139))
Bond yields in Asia rose particularly steeply, with Australia’s three-year government yield reaching a 15-year high of 5.037%. Japan’s 10-year yield rose to 2.965%, while investors also priced in the possibility of further rate increases by central banks in the US, Japan, Europe, Australia and New Zealand. ([investing.com](https://www.investing.com/news/economy-news/global-bonds-fall-as-surging-oil-prices-inflame-inflation-risks-4897139))
Oil prices have now risen sharply from their levels earlier in the summer as the conflict has disrupted supplies from the Middle East. Reuters has reported that exports from regional producers have fallen to about 11 million barrels a day, from roughly 18 million before the war began, according to Argus data. ([investing.com](https://www.investing.com/news/commodities-news/explainerwhy-isnt-oil-above-100-despite-supply-disruptions-4890766?utm_source=openai))
“We expect eight of the nine DM central banks to hike rates between now and year-end,” analysts at JPMorgan said in a note, referring to developed-market central banks. They said the expected tightening could remain limited, but warned that resilient growth, persistent core inflation and higher commodity prices posed risks to their forecasts. ([investing.com](https://www.investing.com/news/economy-news/global-bonds-fall-as-surging-oil-prices-inflame-inflation-risks-4897139))
The prospect of higher borrowing costs weighed on equities, with Japan’s Nikkei falling 2.8%, South Korea’s Kospi dropping 2.7% and Australia’s resources-heavy market losing 1%. US stock futures were also weaker, while the dollar strengthened against major currencies as Treasury yields rose. ([investing.com](https://www.investing.com/news/economy-news/global-bonds-fall-as-surging-oil-prices-inflame-inflation-risks-4897139))
Investors were also awaiting US consumer price figures for August, which were expected to influence the debate over whether the Federal Reserve should raise rates next week. Economists had forecast a 0.2% monthly increase in core consumer prices, although recent producer-price data had raised concern that inflation could prove firmer than expected. ([investing.com](https://www.investing.com/news/economy-news/global-bonds-fall-as-surging-oil-prices-inflame-inflation-risks-4897139))
