By Emese Bartha
Yields on global bonds fell sharply, reversing earlier steep rises before showing signs of tentative stabilization as President Trump signaled the prospect of an end to the Middle East conflict, driving oil prices lower.
Trump said on his Truth Social platform that the U.S. and Iran have had "very good and productive" conversations regarding a complete and total resolution of hostilities in the Middle East. He will therefore postpone all military strikes against Iranian power plants and energy infrastructure for five days.
Talks will continue throughout the week, he said.
The 10-year German Bund yield retreated to 2.998%, down 3 basis points on the day, having earlier traded at 3.077%, the highest since 2011, according to LSEG. The 10-year U.S. Treasury yield fell 1 basis point to 4.382%, having earlier risen to 4.445%, the highest since July.
Yields on 10-year U.K. government bonds were down 3 basis points at 4.952%, having earlier hit their highest since 2008 at 5.118%, LSEG data showed.
Brent oil last traded at $104.05, down 7.3%.
Earlier in the day, a further escalation of the war, including new U.S. and Iranian threats on energy assets in the Middle East stoked selloffs in global bonds, while Trump gave a 48-hour deadline to Iran to reopen the Strait of Hormuz.
The continued closure of the Strait of Hormuz--a vital naval way for global energy transport--kept oil prices elevated, stoking global inflation concerns and keeping investors' expectations for interest-rate hikes high.
"Bond markets remain under significant pressure as Trump's 48-hour deadline casts its shadow," Hauke Siemssen, rates strategist at Commerzbank, said. "The risks of further rising oil prices and inflation expectations appear high."
Earlier in the day, yields on the bonds of more indebted eurozone countries such as Italy and France also rose sharply, causing their spreads over German yields to widen.
The 10-year Italian BTP yield rose above 4% for the first time since July 2024, hitting a high of 4.055%. Spreads between 10-year Italian and German government bonds hit their widest since mid-2025, while French-German spreads were their widest since November.
The escalation of the war carries stagflation risks, with inflation rising but growth weakening, especially for countries strongly reliant on energy imports, such as eurozone countries.
"Recession on the horizon seems set to be preceded in the short-term by stagflation as the drag on global growth from higher energy prices and the impact on broader inflation pressures from those higher energy prices weighs desperately on risk appetite," First Abu Dhabi Bank analysts said in a note.
The situation still lacks visibility as to how long the war will take and how it will end. However, markets could quickly recover if there are any signs of de-escalation.
"History shows that markets can recover swiftly when geopolitical tensions ease," Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note.
A resolution to the war would prompt an unwind in rate-hike expectations and energy prices would fall, Aaron Hill, chief market analyst at FP Markets, said.
A prolonged conflict, however, would keep energy prices elevated and heighten stagflation risk, with global growth risking "a sizeable hit," Hill said.
Write to Emese Bartha at emese.bartha@wsj.com
(END) Dow Jones Newswires
March 23, 2026 08:46 ET (12:46 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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