Asian bonds and stocks were set for further losses Friday as elevated oil prices fueled inflation concerns, driving long-term Treasury yields to multi-decade highs and raising the prospect of further Federal Reserve rate hikes. The bond selloff deepened Thursday, pushing the 30-year Treasury yield to the highest since 2004 and the benchmark 10-year yield eight basis points higher to 5.20%. New Zealand government bonds fell in early Asian trading, while bond futures indicated losses for Australian debt.

US oil edged lower in Asia trading on Friday after Brent crude settled near $107 a barrel, having briefly pared gains on reports that the US and Iran are exploring a phased deal to reopen the Strait of Hormuz. The dollar extended its advance on Thursday, while gold fell. Equity-index futures for Australia and Hong Kong pointed lower, setting up a regional index for its third day of losses.

"We are firmly set up for higher yields in this environment," said Byron Anderson at Laffer Tengler Investments. "Rate hikes do not solve Iran, oil, the AI boom, or inflation." The latest rise in yields extended a sharp repricing since the start of the US-Iran war. Two-year Treasury yields have climbed more than 150 basis points over that period.

Elsewhere, Fed officials continued to emphasize inflation risks. Philadelphia Fed President Anna Paulson said additional hikes may be needed, while New York Fed President John Williams said the central bank still has "a lot of work to do" on price pressures.