The global bond market is having a very bad week, and it’s dragging everything else along for the ride. Government debt prices are falling sharply across the US, Europe, Japan, and the UK as the war in the Middle East sends energy prices surging and forces investors to confront a reality they’d rather not: inflation isn’t done with us yet.
Ten-year US Treasury yields jumped more than 20 basis points last week, reaching their highest level since February 2025. Two-year yields, the market’s most direct bet on where the Federal Reserve heads next, climbed to a 14-month high near 4.1%.
Oil is the accelerant
The something, in this case, is crude oil. Brent is trading around $111 per barrel, driven higher by the Iran-linked conflict in the Middle East and a recent drone strike in the UAE that rattled energy markets. For context, oil at $111 is the kind of price that doesn’t just show up on your gas station receipt. It filters into shipping costs, manufacturing inputs, food production, and ultimately, the inflation data that central bankers obsess over.
The sell-off isn’t confined to Treasuries. Japan’s government is expected to issue additional debt, and that expectation alone has pushed 30-year Japanese government bond yields to record highs.
