Global bond markets came under heavy pressure as sovereign yields surged to multi year highs amid rising oil prices and renewed inflation fears linked to the Iran conflict.
Morgan Stanley strategist Mike Wilson warned that the ongoing bond selloff could trigger a major correction in global equities if long term yields continue moving higher.
Wilson said elevated energy prices caused by the Iran war and the Federal Reserve’s hawkish stance are adding pressure on bond markets. He added that equities may struggle until bond yields stabilize.
The S&P 500 pulled back from record highs, while U.S. stock futures also pointed to further weakness as investors worried about rising borrowing costs and sticky inflation.
U.S. Treasury yields climbed sharply during Asian trading hours. The 2 year Treasury yield rose to 4.103%, the highest level since February 2025.
The U.S. 10 year Treasury yield jumped to 4.631%, its highest since January 2025, while the 30 year Treasury yield surged to 5.159%, reflecting deep stress across bond markets.
Japanese government bond yields also moved sharply higher. Japan’s 20 year bond yield rose 8 basis points to 3.720%, while the 30 year yield climbed 9 basis points to 4.090%. The 40 year JGB yield surged 13 basis points to 4.345%.
India’s 10 year government bond yield hovered near 7.1% as Brent crude oil prices crossed $111 per barrel following fresh Middle East tensions. The RBI also raised annual trading targets for 21 primary dealers to improve liquidity in the sovereign bond market.
The latest selloff accelerated after Donald Trump warned Iran to “get moving, FAST,” which pushed oil prices higher and reignited fears of another global inflation spike.
G7 finance ministers began talks in Paris on Monday as Japan’s Treasury sell-off rattled global bond markets. Japanese investors sold nearly $29.6 billion in US sovereign debt in Q1 2026, the biggest quarterly retreat since mid 2022, while officials warned of a “compounding effect” across bond markets amid rising oil prices, inflation fears, and central bank uncertainty.
