Oil prices jumped Monday after hopes faded for a US-Iran deal on the Strait of Hormuz, pushing the 10-year US Treasury yield to its highest level since 2007. Stock futures and Asian equity indices fell as the bond sell-off spread to the UK, France, Italy, and Japan.
Global stock markets fell Monday after a jump in oil prices sent government bond yields surging worldwide, weighing on equities in Asia and Europe. Futures tracking the S&P 500 and Nasdaq 100 fell 0.3% and 0.5% respectively.
Oil jump pushes Treasury yields to 2007 highs
Brent crude rose more than 4% to as much as $108.63 a barrel in London trading, after President Donald Trump rejected Iran's proposal to reopen the Strait of Hormuz over the weekend. It later eased to around $107, still up 2.5% on the day.
That move sent the 10-year US Treasury yield up as much as 0.05 percentage points to 5.23%, its highest since 2007, while the interest rate-sensitive two-year yield rose by a similar amount to 4.91%. According to Gordon Shannon, fund manager at TwentyFour Asset Management: "With little hope of the squeeze from energy prices ending, bonds remain under pressure."
Rate-hike bets build as inflation risk climbs
The Federal Reserve raised borrowing costs earlier this month for the first time since 2023, and futures markets are now betting on two more quarter-point rate hikes by January — a sharp reversal from the cuts investors had expected before the US-Iran war sent energy prices soaring. Other major central banks are expected to raise rates further in the coming months to contain inflation stemming from the conflict.
Selloff spreads to UK, Europe, and Asia
The UK 10-year gilt yield rose as much as 0.07 percentage points to 5.43%, close to its highest level since 2008, before easing to 5.39%. French and Italian 10-year bond yields also hit fresh multiyear highs, with French borrowing costs at their highest level since 2008.
In Asia, China's CSI 300 index fell 2.2% to its lowest level since August 2025, while South Korea's Kospi dropped 2.7% as both markets reopened after mid-autumn holidays. Japan's two-year government bond yield climbed as much as 0.05 percentage points to 1.98%, a level not traded above since 1995, after Bank of Japan minutes from its July meeting showed some members calling for faster rate rises.
Source: Financial Times
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