U.S. national debt has surpassed $40 trillion as bond yields climb to multiyear highs globally. The primary driver is inflation fueled by the war in Iran, which has disrupted energy markets and pushed U.S. diesel prices above $5.68 a gallon — near record levels. Diesel futures for October delivery have risen roughly 13% in the past week, increasing transportation and production costs across the economy.

Fiscal concerns are mounting as publicly held U.S. debt approaches World War II-era levels relative to GDP. Similar pressures appear overseas, with U.K. bond yields forcing government austerity and Japan's 10-year yield hitting a 30-year high amid tax-cut debates. The term premium — reflecting risks beyond short-rate expectations — has risen sharply since the Iran war began, with elevated premiums in Europe and Japan signaling global fiscal anxiety.

Federal Reserve Chairman Kevin Warsh has added uncertainty by eschewing forward guidance since his Jackson Hole speech in late August. David Kelly, chief global strategist at J.P. Morgan Asset Management, identifies a "Fed risk premium" baked into longer-term borrowing costs. Mike Goosay of Principal Asset Management says investors are broadly reassessing inflation as these forces converge to reshape the bond market.