Global Bond Selloff Accelerates as Oil Prices Spike: Treasury Yields Hit Multi-Year Highs

A synchronized sell-off across global debt markets unfolded Friday as oil prices remained elevated above $90 per barrel, with Brent crude fuelling inflationThe rate at which prices rise across an economy. fears across major economies. US Treasury yields climbed to multi-year highs, with the 10-year approaching 5% and breaking above 4.75%. UK gilts plunged amid political uncertainty around potential leadership challenges to Prime Minister Keir Starmer. Japanese government bonds, long the world's most stable, marched higher as yen-carryIncome earned from holding a position over time. traders repositioned ahead of potential Bank of Japan tightening.

The timing is critical: today marks Jerome Powell's final day as Federal Reserve Chair. His successor, Kevin Warsh, will inherit an economy where inflationThe rate at which prices rise across an economy. dynamics remain contested. Goldman Sachs and other major banks have already pushed forward their first rate-cut expectations from June into December 2026, citing sticky inflation linked to oil shocks and geopolitical premiums. The Conference Board warned of prolonged inflation pressures despite recent retail sales data. Colombia's central banker flagged that interest-rate hikes may need to continue longer than initially forecast.

Energy importers face acute margin pressure: India raised petrol and diesel prices for the first time in four years, absorbing losses to support the rupee. Pakistan secured new LNG shipments from the Gulf, leveraging newfound geopolitical clout. The UAE announced plans to complete a new oil pipeline bypassing the Strait of Hormuz by 2027, underscoring structural vulnerability. Meanwhile, oil exporters like Nigeria's Oando benefited from reduced competition as buyers fled unsafe Gulf production zones. Gold rallied as inflationThe rate at which prices rise across an economy. hedge demand surged; India's gold imports slowed sharply due to new trade restrictions meant to preserve the rupee.

Sceptics note that oil prices have spiked before without triggering sustained inflationThe rate at which prices rise across an economy.; the 2022-2023 cycle saw energy costs recede quickly. Others argue that monetary transmission mechanisms under Warsh may be tighter than under Powell, potentially dampening cost-push pressures if the incoming chair credibly commits to anchoring inflation expectations. But funding costs for governments and corporates have ratcheted meaningfully higher, pressuring credit spreads and equity multiples across the board.