Global bond yields hit 18-year high, oil surge fuels rate hike bets

September 2, 2026 (MLN): Global bond yields climbed to their highest levels in nearly two decades as rising oil prices intensified inflation concerns and strengthened expectations for further interest-rate hikes.

The selloff in sovereign debt began late last week after U.S. Federal Reserve Chairman Kevin Warsh reiterated his commitment to bringing inflation under control and gained momentum this week as renewed Middle East tensions pushed energy prices higher, according to media reports.

Japan’s 10-year government bond yield briefly reached 3% for the first time since 1996, while the U.K.’s 30-year gilt yield climbed to its highest level since 1998. The U.S. 10-year Treasury yield also moved to levels last recorded in January 2025.

Meanwhile, the Bloomberg global sovereign bond yield index rose for a fourth consecutive session on Monday to 3.72%, its highest level since mid-2008.

Markets are increasingly factoring in a higher path for short-term interest rates in the U.S. and other major economies, while investors reassess where neutral policy rates may settle.

Global fixed-income markets have already faced sustained pressure due to concerns over increased government borrowing in Japan, the U.K. and the U.S., prompting investors to demand greater returns for holding longer-term debt.

Additional borrowing by U.S. technology companies to finance artificial intelligence investments has also raised concerns over competition for capital and weaker demand for government bonds.

Meanwhile, renewed U.S.-Iran hostilities have heightened fears of prolonged disruptions to energy supplies through the Strait of Hormuz, contributing to the latest rise in oil prices. Officials have warned that the Middle East conflict could persist for months, adding to uncertainty over the inflation outlook.

Market participants are now pricing in an almost 70% probability of a 25-basis-point Federal Reserve rate hike this month. A European Central Bank rate increase next week is fully priced in, while traders are also almost certain that the Bank of Japan will raise rates later this month.

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