A global bond sell‑off deepened on Thursday, sending big nations’ borrowing costs back to their highest levels of the year, as a surge in oil prices towards $100 a barrel reignited fears of an inflation shock. The 10‑year German yield rose as much as 0.03 percentage points to 3.21 %, its highest level since 2011. US Treasury yields advanced close to their Iran war peak, hitting 4.68 % in early trading, while the 10‑year French bond yield touched 4 % for the first time since 2009 and the UK gilt yield climbed to 5.08 %.\n\nEscalating strikes between the US and Iran have shredded investors’ hopes that the Strait of Hormuz can be fully reopened, and Iran‑backed Houthi militants announced a blockade of Saudi Arabia, pushing crude to a seven‑week high. Mike Bell, head of market strategy at RBC Blue Bay Asset Management, warned that "sticking one’s head in the sand isn’t a strategy for dealing with political risk." Jon Hill, head of US inflation strategy at Barclays, noted that rising inflation expectations show the Fed may not be able to fix the problem.\n\nInvestors now anticipate further rate hikes: the ECB is expected to hold rates steady, but traders price in at least two more quarter‑point increases by next April.

The Federal Reserve is seen raising rates by a quarter point at least twice by March, a reversal from pre‑conflict expectations of cuts. New Fed chair Kevin Warsh signalled independence from President Donald Trump, who has long pressured the central bank to cut rates. Short‑term inflation expectations rose, with the one‑year US inflation swap reaching 4.15 %, its highest since January 2025.