Global bond yields retreat as Iran war inflation fears ease

Yesterday 18:15

By: Azzat Manal

Global bond yields retreat as Iran war inflation fears ease

Government bond yields across major global markets declined on Thursday as falling oil prices eased concerns that the conflict involving Iran could trigger a fresh wave of inflation.

The retreat followed a sharp sell-off on Wednesday, when bond yields in several major economies climbed to their highest levels in years. Germany’s 10-year government bond yield rose to 3.395%, its highest level in roughly 15 years, while the 10-year U.S. Treasury yield reached 4.814%, marking its strongest level in nearly three years.

Market sentiment improved on Thursday as oil prices moved lower, reducing fears of a major disruption to energy supplies and the potential inflationary consequences that could follow.

Comments from U.S. President Donald Trump also helped calm investors. Trump said the U.S. military campaign against Iran would not last for an extended period, easing some concerns about prolonged instability in energy markets.

Investors were also turning their attention to the U.S. nonfarm payrolls report due Friday. The employment figures are expected to play an important role in shaping expectations for the Federal Reserve’s interest-rate decisions and the possibility of monetary easing in the months ahead.

Among major 10-year government bonds, the U.S. yield stood at 4.776%, down 1.8 basis points. The UK yield fell 4.7 basis points to 5.189%, while Germany’s declined 1.6 basis points to 3.360%. France’s 10-year yield dropped 2.5 basis points to 4.230%, while Japan’s yield was around 2.967%.

The latest moves highlight the sensitivity of bond markets to both energy prices and monetary policy expectations. A sustained increase in oil prices could revive inflation concerns and make central banks more cautious about cutting interest rates.

Conversely, continued weakness in energy prices combined with softer-than-expected economic data could strengthen expectations for monetary easing. Such a scenario could provide further support for government bonds and put additional downward pressure on yields.

For investors, developments in the Middle East, oil-market conditions and upcoming economic indicators are therefore likely to remain key drivers of global bond markets in the near term.