Faisal Islam: Why bond market wildfire is keeping world leaders up at night

It is not just the wildfire burning in the bond markets, with many countries facing interest rates at multi-decade highs.

The markets lending money to governments appear to be changing more fundamentally too.

Over summer, the message has been made clear: countries will have to pay more to borrow cash.

The immediate reason is the ongoing closure of the Strait of Hormuz and renewed hostilities between the US and Iran, which has pushed up inflation and, in turn, raised expectations of higher interest rates in the world's major economies.

Markets had assumed tensions would subside, and so too would oil and gas prices, ahead of the US midterm elections in November.

It was wishful thinking, based on the hope that US President Donald Trump would want the conflict in the Middle East resolved well before Americans go to the polls.

But that has not happened, leaving markets pricing in higher energy prices, a chronic Gulf crisis, higher inflation for longer - and so higher interest rates.

The bigger picture is rising demand for borrowing across the world - and not just from governments. Big tech companies are turning to the same bond markets to raise hundreds of billions of dollars for investments in AI data centres.