Australian bonds slid, tracking an overnight slump in Treasuries after escalating Middle East tensions drove up oil prices and fueled concerns about inflation. The yield on Australia’s three-year notes surged as much as 18 basis points to 5.03%, the highest since May 2011. That on 10-year debt jumped 13 basis points to 5.38%. The move followed a US bond-market selloff, which accelerated on Thursday as spiking oil prices fanned inflation fears and the Department of the Treasury purchased fewer bonds than expected during its first expanded buyback operation. Investors are awaiting US inflation data due Friday to help gauge if the Federal Reserve raises interest rates at a decision set for next week.

“It’s just massive hawkish sentiment taking over,” said Michael Tang, interest rate strategist at Commonwealth Bank of Australia. “A lower US CPI and a Fed hike are really the only circuit breakers I see at this point, otherwise I don’t think anyone is comfortable being long rates.”

Overnight-indexed swaps are pricing in an 84% chance that the Reserve Bank of Australia will raise the official cash rate this month, up from 65% on Thursday.