Global Bond Selloff Deepens On Inflation Fears

A global selloff in government bonds intensified on Tuesday as investors grew increasingly concerned that rising energy prices could fuel inflation and force central banks to keep interest rates higher for longer.

The latest escalation in fighting between the United States and Iran pushed oil prices higher, adding to fears that renewed inflationary pressure could trigger tighter monetary policy and weigh on global economic growth.

Heavy selling drove government borrowing costs sharply higher across major economies. The yield on 30-year UK government bonds climbed to its highest level since 1998, while the 10-year yield reached a level last seen during the 2007-08 global financial crisis.

In Japan, the 10-year government bond yield touched 3 percent, its highest level in 30 years, amid concerns over plans for large-scale government spending.

The 30-year US Treasury yield stood at 5.27 percent, close to levels last seen in 2007, while the 10-year yield rose to its highest point since January 2025.

“The bond sell-off has… been a global affair,” said Deutsche Bank’s Jim Reid.

He identified the latest escalation in the Middle East as the “main culprit,” after the United States and Iran exchanged strikes for the first time since late July.

European equities also came under pressure. Frankfurt’s DAX fell more than 1 percent, while London’s FTSE 100 declined as trading resumed after a public holiday.

Fresh inflation data added to concerns over interest rates. Official figures showed eurozone inflation rose to a three-year high of 3.3 percent in August, strengthening expectations that the European Central Bank could raise interest rates next week.

Oil prices rose by around 2 percent on Tuesday after the United States and Iran exchanged fire for the first time in weeks. US President Donald Trump also threatened to hit Iran “hard”.

After six months of war, the conflict remains at an impasse, with Tehran keeping the strategic Strait of Hormuz closed and Washington maintaining a counter-blockade of Iranian ports.

“With Trump now threatening further action against Iran, including against Kharg Island, Iran’s key oil export hub, supply worries are once again front and centre,” said Susannah Streeter, chief investment strategist at Wealth Club.

Investors are now turning their attention to key US economic data ahead of the Federal Reserve’s policy meeting on September 16.

The jobs report and consumer price index data could influence the central bank’s next interest-rate decision, with expectations of a rate increase rising after Fed Chair Kevin Warsh delivered a hawkish speech on Friday.

Asian markets followed Wall Street lower, with Tokyo, Hong Kong and Shanghai all recording declines.

The yen weakened against the dollar despite US Treasury Secretary Scott Bessent saying he expected Japan to support the currency. The yen has given up half of the gains made following a historic joint intervention after it fell to a 40-year low.

The comments were interpreted by markets as a possible signal that the Bank of Japan could tighten monetary policy at its meeting later this month.

Shein Debuts In Hong Kong

In corporate markets, shares in fast-fashion giant Shein fell as much as 10 percent during its long-awaited trading debut in Hong Kong.

The company had raised $1.7 billion through a high-profile initial public offering before its shares later recovered most of the losses to close almost flat.

Taiwanese chipmaker MediaTek moved in the opposite direction, with its shares surging nearly 10 percent after US technology giant Nvidia announced a $3.5 billion investment in the company.