The Middle East war is driving up the cost of public debt in rich countries which could jam state budgets and push governments to unfold austerity policies, economists warn.The yields demanded by investors to lend to governments by buying their bonds have peaked in recent days, indicating weakening confidence in their economies and inflation fears.
The yield on the 30-year US Treasury bond touched on Tuesday its highest level since 2007 at 5.18 percent. Japanese and British 30-year bonds have hit records going back to 1999 and 1998 respectively, while benchmark 10-year yields have also surged.
The war has driven up energy prices and inflation, and put central banks in a tricky position -- all this is "blowing a perfect storm through the public debt market", Vincent Juvyns, an analyst at ING bank, told AFP.
Inflation surge
After the US and Israel launched strikes in Iran on Feb. 28, Iran effectively closed the Strait of Hormuz, a key oil export route.
