Global bond markets extended their slump Friday as the 10-year U.S. Treasury yield surged to 4.6%, its highest level in over a year. The decline in bond prices briefly paused a stock rally that had pushed major indices to record highs, as investors recalibrated positions amid mounting inflationary pressures.

Fading hopes for a U.S.-Iran peace deal continued to weigh on markets, with energy prices remaining elevated. The absence of progress on reopening the Strait of Hormuz added to concerns about sustained inflation. Additionally, political uncertainty surrounding Prime Minister Keir Starmer in the UK complicated the country's fiscal trajectory.

Japanese and UK government bonds experienced particularly sharp selloffs that spilled over into other markets. Japan's bond prices fell due to hot inflation data and government spending plans, while political instability in the UK raised fresh questions about economic policy. Fixed-income investors now closely watch Federal Reserve interest rate expectations amid these global developments.