A global sell-off in government bonds intensified on Tuesday, pushing borrowing costs to their highest levels in decades and rattling investors. As rising oil prices compound inflation worries, bond yields are testing fresh highs, squeezing government budgets and raising rates on consumer and business loans. The 10-year U.S. Treasury yield reached its highest since January 2025, while the 30-year yield hovered near a two-decade high. In other markets, the 10-year Japanese bond yield climbed above 3 percent for the first time since 1996, British 10-year yields hit their highest since mid-2007, and German 10-year yields reached levels last seen in 2011.

America's rising borrowing costs have set off a battle between Treasury Secretary Scott Bessent and bond investors. In many advanced economies, widening budget deficits, high debt levels, and stubborn inflation have unnerved investors who believe governments are unable or unwilling to improve fiscal situations. A borrowing binge by technology companies to build artificial intelligence systems is another factor, with companies issuing billions in bonds that are swamping markets and pulling investors away from government debt.

One of the most pressing drivers of higher yields is the protracted war in Iran. As the United States and Iran renewed attacks, oil and natural gas prices climbed again, with Brent crude rising above $90 a barrel, nearly 30 percent higher than prewar levels. Higher fuel prices add enormous costs to governments in Asia and Europe, big energy importers. Government debt levels have reached eye-watering amounts, with America's gross national debt topping $40 trillion, or more than 120 percent of the economy. In France, public debt exceeded 3.5 trillion euros, and in Japan, debt is more than twice the size of the economy. Investors see many politicians as not doing enough to shrink deficits, with France becoming the region's most worrisome debt market.