Global bond selloff sends 30-year yield to highest since 2007; inflation fears grip markets

The global bond rout has accelerated dramatically over the past week, driven by a combustible mix of geopolitical oil shocks, persistent inflationThe rate at which prices rise across an economy. data, and a stark reversal in expectations around central bank rate cuts. The U.S. 30-year Treasury yield has climbed to 5.11%, the highest level since May 2025 and approaching the last time such yields were seen in 2007, before the financial crisis. The move is not confined to the U.S.; yields are soaring in Japan, Europe, and the UK, with the British pound registering its worst week against the dollar since 2024 as investors fled risk assets globally.

The Iran war has emerged as the primary catalyst. Crude oil prices have climbed sharply as markets price in supply disruptions and uncertainty, while tanker diversions around the Persian Gulf and reports of Iranian oil shipments being masked suggest the full extent of supply losses remains unclear. Major forecasters have slashed oil demand growth estimates for 2026, and energy importers from India to Japan are bracing for higher fuel costs and persistent inflationThe rate at which prices rise across an economy.. The tightening is particularly acute for emerging markets, where weak currencies and rising import prices threaten to force central banks into holding rates higher for longer.

Wall Street's consensus expectations have shifted in real time. JPMorgan Chase strategists, Goldman Sachs research, and RBC equity strategists are all warning that equities face headwinds if yields approach 5% or higher on the 10-year. BofA's Hartnett has called the stock market "ripe for profit-taking" in June, citing crowded positioning and inflationThe rate at which prices rise across an economy. risks. The memory of the 2022-2023 bond selloff is fresh: rapid yield rises tend to compress valuations and reduce the appeal of growth stocks, particularly in tech and semiconductors where the current rally has been most intense.

Conversely, the incoming Fed chair Kevin Warsh faces an unenviable mandate: inflationThe rate at which prices rise across an economy. pressures are rising just as he takes the helm from Jerome Powell, yet tightening further risks tipping the economy into recession or triggering a market correction. Some market participants argue that the bond move is overdone and that central banks will eventually respond with crisis-fighting measures; others believe yields have room to run if inflation becomes entrenched. The debate between "higher for longer" rates and imminent Fed pivot is unresolved.