Global bond markets tumble as Iran war and inflation push Treasury yields higher

Government bond markets around the world tumbled on Friday, driving borrowing costs sharply higher from Japan to the United States.

Investors are worried that rising oil prices and persistent inflation will force major central banks to keep interest rates elevated for longer. The selloff was reported by Bloomberg.

Why did global bond markets tumble?

Global bond markets sold off on fears that the war in Iran and surging oil prices will keep inflation high and force central banks to maintain tight monetary policy. Long-dated bonds, which are most sensitive to inflation risk, led the decline. Stronger US consumer and wholesale price data added to investor caution.

The selloff hit major economies including the US, Japan, the UK, Germany, Spain, Australia, and New Zealand. It also spilled into equity markets, with US stocks ending Friday's session lower.

How high did US Treasury yields go?

The US 30-year Treasury yield climbed above 5.1%, approaching levels last seen in 2007. The benchmark 10-year Treasury yield rose about 12 basis points to nearly 4.6%.

That marked the 10-year's biggest weekly increase since the market turmoil triggered by President Donald Trump's tariff measures in April 2025.

What happened to Japan and UK government bonds?

In Japan, the 30-year government bond yield reached 4% for the first time since the securities were introduced in 1999.

British government bonds also came under heavy pressure. The 30-year gilt yield hit its highest level in nearly three decades amid growing political uncertainty around Prime Minister Keir Starmer.

Yields also rose sharply in Germany, Spain, Australia, and New Zealand. Investors sold bonds globally as risk repricing spread across markets.

How did oil prices and the Iran war drive the selloff?

The market turmoil intensified after crude oil prices surged. A summit between Trump and Chinese President Xi Jinping failed to produce progress on ending the war in Iran.

The summit also yielded no progress on reopening key energy shipping routes in the Strait of Hormuz. Energy supply concerns continue to weigh on global bond markets.

Recent US inflation data further fueled the selloff. Stronger-than-expected increases in both consumer and wholesale prices reinforced expectations that the Federal Reserve and other central banks may need to maintain tighter policies.

What are analysts saying about the bond selloff?

"Bond yields definitely feel like they are getting unhinged," said Subadra Rajappa, head of US rates strategy at Societe Generale Americas, in remarks to Bloomberg Television.

Rajappa said markets were increasingly testing both the Federal Reserve and policymakers in Washington. Higher rates continued driving up financing costs across the economy.

Japanese Finance Minister Satsuki Katayama said she and her Group of Seven counterparts would discuss the global bond market selloff at meetings scheduled next week in Paris.

How will the bond dip affect economies and stock markets?

Rising bond yields increase borrowing costs for governments. They typically filter through to higher business and consumer loan rates, potentially slowing economic growth.

The pressure on bonds also spilled into equity markets. US stocks fell on Friday after a strong rally that began in late March.

Bloomberg strategist Edward Harrison warned that additional increases in long-term yields could further unsettle stock markets. Sectors reliant on long-duration growth expectations are particularly exposed.

Analysts said investors who had recently returned to bond markets were reassessing positions. Inflation concerns, geopolitical tensions, and uncertainty over the global economic outlook are driving the shift.