Japanese government bonds retreated in Tokyo trading on Thursday as crude oil prices jumped on Middle East tensions. The move pushed JGB yields to 29-year highs, reflecting investor concerns over rising energy costs in Japan, a major net oil importer.

The yen weakened to levels last seen in July 2024, while the Nikkei 225 fell more than 1%. Investors fled to the safety of the US dollar, reducing demand for Japanese debt. This inverse relationship between oil prices and JGBs stems from inflation worries and economic uncertainty that higher energy costs typically signal.

Geopolitical risk remains the primary driver behind the oil price surge, amplifying its impact on global bond markets. US Treasury yields rose as investors priced in continued inflation and tighter monetary policy, creating broader pressure across fixed-income assets.

The bond market reaction underscores how energy shocks can quickly reshape investor sentiment in export-dependent economies like Japan, where rising import costs threaten already fragile inflation targets.