US long-term borrowing costs surged to their highest level since 2007 on Thursday as oil prices jumped above $105 and inflation data came in hotter than expected. The 30-year US bond yield rose 0.06 percentage points to 5.35 per cent, while UK 10-year yields hit 5.34 per cent and German 10-year yields climbed to 3.48 per cent.

The sell-off was driven by a 4 per cent surge in Brent crude to $105.82 a barrel after Saudi Arabia reported August production of 6.2mn barrels a day — the lowest monthly figure in 2026 and 23 per cent below July. The European Central Bank raised rates to 2.5 per cent, warning inflation would remain well above its 2 per cent target for an extended period due to the Iran war.

US wholesale inflation accelerated to 5.4 per cent year-on-year in August, up from 4.7 per cent, as fuel costs pushed up shipping expenses. President Donald Trump conceded oil prices would stay elevated past the midterm elections, while S&P Global Energy said markets were settling into a "new normal" of higher prices with no return to prewar Middle East output levels projected by end-2027.

Stocks fell in tandem, with the S&P 500 down 0.6 per cent and the Nasdaq 100 dropping 1.3 per cent. A $22bn auction of 30-year Treasuries will test investor appetite for US debt.