Government bond yields surged across major markets Tuesday, reaching multi-decade highs as Middle East hostilities reignited inflation fears. The U.S. 10-year Treasury yield climbed to a 20-month high of 4.7880%, while Japan's 10-year bond yield hit 3% for the first time since 1996. U.K. 10-year Gilt yields rose to 5.2341%, the highest since June 2008, and the 30-year Gilt reached 5.8856%, a level not seen since March 1998. Germany's 10-year bund yield hit a 52-week high of 3.3546%.

The selloff followed U.S. and Iranian retaliatory strikes near the Strait of Hormuz, pushing Brent crude up 2.2% to $92.38 per barrel. Treasury Secretary Scott Bessent, speaking at the G20 in Asheville, North Carolina, dismissed concerns, calling the U.S. bond market "the best performing market" and citing Fitch Ratings' AA+ reaffirmation.

Steve Englander of Standard Chartered warned yields face sustained upward pressure, noting the U.S. isn't alone in deficit challenges. Meanwhile, U.K. Prime Minister Andy Burnham is reportedly planning legislation for greater public control of utilities, as British yields catch up after a holiday.