BOND MARKETS JOLTED AS IRAN TENSIONS LIFT OIL AND INFLATION FEARS

Developing story: Bond yields, oil prices, Federal Reserve expectations and equity-market reactions may change through the trading day.

Global bond markets sold off Tuesday as the worsening U.S.-Iran confrontation pushed oil prices higher and revived inflation concerns across major economies. Reuters reported that the 30-year U.S. Treasury yield reached its highest level since 2007, while Japanese and European government yields also climbed under pressure.

The move shows how the Hormuz crisis has moved from shipping lanes into the global cost of capital. Higher oil prices threaten to raise headline inflation, while governments are already issuing large amounts of debt and investors are demanding more compensation to hold long-dated bonds. That combination can quickly tighten financial conditions even without a central-bank rate hike.

The market pressure came despite weaker U.S. economic data that had reduced expectations for near-term Federal Reserve tightening. Normally, soft data can push yields lower by making rate hikes less likely. Tuesday’s selloff showed that investors were focused more on inflation and fiscal risk than on a simple growth slowdown.

The Middle East trigger was direct. Brent crude moved above $91 a barrel as prospects for a U.S.-Iran peace agreement faded and traffic through the Strait of Hormuz remained disrupted. Iran said the strait would not reopen unless the United States meets conditions tied to the expired interim framework, while Washington has continued blockade pressure and threats.

Fiscal concerns amplified the move. Investors are watching deficits, heavy Treasury issuance and reduced foreign appetite for U.S. debt. When those worries meet an oil shock, long bonds become vulnerable because investors fear both higher inflation and higher supply of government debt.

Artificial intelligence spending is another pressure point. Reuters has reported that major technology companies are relying on expanding financing structures to build data centers and power infrastructure. That demand for capital competes with governments and other borrowers, adding to the sense that global markets are entering a period of heavier debt supply.

The equity market response was cautious. European shares slipped, U.S. futures declined and volatility rose as investors weighed whether higher yields would erode valuations, especially for long-duration growth stocks. A bond selloff can become an equity problem when discount rates rise faster than earnings expectations.

What is confirmed is that long-dated yields rose sharply across major bond markets while oil remained elevated because of the Iran conflict. What remains unresolved is whether the selloff stabilizes as a risk premium or becomes a broader break in confidence over inflation, fiscal policy and the financing demands of the AI buildout.

Fact-check date: August 18, 2026. Article type: News. Sources: Reuters. Developing note: Bond yields, oil prices, Federal Reserve expectations and equity-market reactions may change through the trading day.