By Emese Bartha
Global government bonds start the new week as they finished the previous one, with yields hitting ever higher levels as oil prices continue to rise and the Middle East conflict still lacks a resolution.
The fragile cease-fire between the U.S. and Iran holds, but the Strait of Hormuz remains closed.
"Global bonds are starting the week under heavy pressure as the Iran risk premium pushes crude higher and forces markets to reprice inflation risk," Patrick Munnelly, Tickmill Group's partner in market strategy, said in a note.
U.S. President Trump warned that "for Iran, the clock is ticking," which reinforced concerns that the conflict could move back toward a more active military phase, delaying any normalization of traffic through the Strait of Hormuz, Munnelly said.
The 10-year German Bund yield hit 3.193%, its highest since 2011, LSEG data showed. Ten-year Japanese government bond yields reached highs unseen since the late 1990s while 10-year U.K. government bond yields hit their highest since 2008.
The 10-year U.S. Treasury yield rose to 4.631%, the highest since January 2025.
"Government bond yields are rising across the U.S., U.K., Europe and Japan as investors reassess inflation risks, higher energy prices, political uncertainty and growing fiscal pressure," Lale Akoner, global market strategist at eToro, said in a note.
"The move higher in yields suggests markets are increasingly accepting a 'higher-for-longer' interest-rate environment," she said.
Brent oil last traded up 0.86% at $110.20 per barrel.
The rise in government bond yields--and thus in borrowing costs--is also increasing pressure on governments carrying a large debt burden, Akoner said.
High oil prices could draw support measures from various governments, which would add to pressure on public finances at a time when the room for maneuver is already very limited, Mohit Kumar, global economist at Jefferies, said in a note.
As the U.S. and Iran still appear far from a deal and with Brent crude oil prices above $110, "[the] market fears higher inflationary pressures," he said.
The risk at this juncture is that the impact of slower economic activity, higher oil prices and consequently higher inflation pressures will only intensify in the near term, Simon Ballard, chief economist at First Abu Dhabi Bank, said in a note.
Write to Emese Bartha at emese.bartha@wsj.com
(END) Dow Jones Newswires
May 18, 2026 04:57 ET (08:57 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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