Global markets fall as Gulf tensions lift oil prices and yields rise

Global financial markets retreated on Monday as escalating tensions in the Gulf pushed oil prices higher, stoking inflation fears and driving up government bond yields. The sell-off came amid fresh drone attacks in the region and ahead of a critical earnings report from technology giant Nvidia later in the week.

A drone strike caused a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia reported intercepting three other drones. Concurrently, the vital Strait of Hormuz remains largely closed to shipping as Iran seeks to formalize its control of the waterway, which normally carries about one-fifth of the world's seaborne oil trade. Analysts at Capital Economics warned that the closure is draining global oil inventories rapidly, with stocks potentially reaching critical levels by the end of June. They suggested this could push Brent crude prices to $130-$140 per barrel or higher, and warned that a prolonged closure could drive inflation in the UK and euro zone toward 10 percent and trigger a global recession.

Brent crude was trading above $110 a barrel, with U.S. crude also gaining. Futures contracts indicated markets are bracing for protracted shortages....