Government bond yields rise as oil prices fuel inflation rate fears

Government bonds across major economies fell sharply on Monday, extending a global selloff as rising energy prices linked to the ongoing conflict in the Middle East intensified inflation fears and reshaped expectations for central bank interest rate hikes. Yields, which move inversely to bond prices, climbed to multi-month or multi-year highs in the United States, Europe, and Asia.

In early trading, the yield on the benchmark 10-year U.S. Treasury note rose to its highest level since February 2025, while the two-year yield reached a 14-month peak. The 30-year U.S. bond yield also climbed to a one-year high. The selloff followed a steep decline last week and was driven by a sustained climb in oil prices, with Brent crude futures trading near $111 a barrel. The price surge came as diplomatic efforts to end the conflict involving Iran appeared to stall following a reported drone strike at a nuclear power plant in the United Arab Emirates.

Investors are increasingly concerned that high energy costs will fuel broader price increases, forcing central banks to maintain tighter monetary policy. Market pricing now indicates a greater than 50% chance the U.S. Federal Reserve will raise...