Government bond yields jumped again this week, with some reaching levels last recorded around the global financial crisis, as the escalating conflict in the Middle East threatens to keep energy prices and therefore inflation elevated.
With the conflict showing no sign of ending, investors are bracing for another surge in inflation that could put pressure on central banks to tighten monetary policy further, making borrowing more expensive.
The outlook for crude supplies has deteriorated further after Yemen’s Iran-backed Houthi rebels hit several Saudi energy targets and advanced towards the Bab el-Mandeb Strait.
The waterway is a key alternative route for global energy shipments while the Strait of Hormuz remains effectively closed and fighting between US forces and Iran shows no sign of easing.
International benchmark Brent crude has traded above $100 a barrel in recent days. On Friday morning, the front-month contract was trading just below $106 a barrel.
