The 10-year US Treasury yield hit 5.03 per cent on Tuesday, its highest level since 2007, as investors sold government debt following a surge in oil prices and expectations of a Federal Reserve rate increase. The yield first surpassed 5 per cent on Monday, the first time since 2023, in a bond rout sparked by the Iran war shock. Globally, Japan's 10-year bond yields also rose to 3.04 per cent, their highest in 30 years. 'Government bond yields are increasing globally,' wrote Mansoor Mohi-uddin, chief economist at Bank of Singapore, citing the Middle East oil shock, persistent inflation, and central banks resuming rate hikes as key drivers.

Brent crude rose 1.9 per cent to $107.70. The Bank of Japan is expected to raise rates by 0.25 percentage points to 1.25 per cent, its highest in 31 years. Global equity markets slipped, with South Korea's Kospi down 0.9 per cent and Taiwan's Taiex 0.8 per cent lower.

Strategists noted borrowing costs may need to rise further to significantly impact stocks.