Global Bond Markets Tumble as U.S.-Israeli War Escalates

Global bond markets experience a significant selloff as the U.S.-Israeli conflict with Iran intensifies. Rising oil prices and investor fears of inflation lead to soaring bond yields and expectations of rate hikes from European central banks. Markets brace for a possible stagflation scenario.

Global bond markets faced a substantial selloff on Monday, driven by heightened geopolitical tensions as a worsening U.S.-Israeli conflict with Iran causes oil prices to surge past $115 per barrel. This escalation has fueled fears of inflation, prompting concerns about potential central bank reactions worldwide.

As the conflict led some major oil producers to cut supplies, oil prices spiked by up to 28% to nearly $120 per barrel, the highest since July 2022. In response, investors anxiously watched the Brent crude's increase of 16% to around $107, while financial markets grappled with the ongoing disruption risks to the critical shipping route through the Strait of Hormuz.

The situation also shifted the focus to central banks, with investors pricing in possible rate hikes due to inflationary pressures. European and British markets were particularly affected, with significant yield increases observed in government bonds. Analysts warn of a potential 1970s-style stagflation if the conflict continues unabated.

(With inputs from agencies.)