US strikes on Iran drive global bond selloff

A global selloff in financial markets deepened on Thursday after the United States launched fresh military strikes on Iranian targets, sending oil prices higher, stocks lower and government bond yields surging.

The escalation in the Middle East follows weeks of rising tensions and adds fresh pressure on already fragile markets. Investors are already on edge over stubborn inflation, record-high government debt, and concerns about the economic outlook. The U.S. national debt this year crossed $40 trillion for the first time, raising fears about long-term fiscal stability. Meanwhile, in the eurozone, inflation hit its highest level in three years in August, driven largely by a jump in energy prices— another headwind for consumers and businesses.

The shockwaves were immediate. Japan’s benchmark 10-year government bond yield jumped to 3 percent on Thursday, the highest since 1996, as investors demanded higher returns to hold long-term debt. Across Europe, yields on sovereign bonds also rose sharply, pushing borrowing costs up for governments and companies alike. Oil prices climbed more than 2 percent, with Brent crude nearing $90 per barrel, as traders brace for potential supply disruptions in a region critical to global energy markets. U.S. stock futures fell sharply, signaling a likely drop in equities when Wall Street opens.

The selloff reflects a broader shift in investor sentiment: a growing belief that interest rates may stay higher for longer, increasing the cost of servicing debt and squeezing growth. Central banks, including the Federal Reserve and the European Central Bank, have signaled caution on rate cuts, complicating efforts to balance inflation control with economic stability. The dual pressure of geopolitical risk and fiscal strain is tightening financial conditions worldwide. If sustained, this could slow investment, dampen consumer spending and push some economies closer to recession. The stakes are high—not just for markets, but for the millions of households and businesses caught in the crossfire of rising costs and uncertainty.