On Monday, oil prices climbed and global bond markets experienced volatility due to escalating tensions in the Middle East, which fueled inflation concerns and speculation that central banks might need to hike interest rates. Brent crude, the global oil benchmark, saw a rise following an assault on a nuclear facility in the United Arab Emirates.
The increase in oil prices coincided with a standstill in U.S.-Iran peace negotiations during the sixth week of a ceasefire. Former President Donald Trump expressed urgency in a social media post, warning Iran that “the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them. TIME IS OF THE ESSENCE!” Brent crude prices surged by up to 1.77% to $111.16 per barrel, reaching their highest in nearly two weeks before settling back to $110 after Iran reportedly responded to a new U.S. proposal aimed at resolving the conflict.
Iran’s Foreign Ministry spokesperson, Esmaeil Baqaei, noted that discussions were ongoing through a Pakistani mediator, though he withheld specifics. Meanwhile, the bond markets were in flux, with the 10-year U.S. Treasury yield hitting 4.631%, its peak since February 2025, before retracting to 4.599%. In the UK, the 10-year gilt yield rose to 5.19%, surpassing its 18-year high from the previous Friday, before falling back to 5.15%.
Political uncertainty is also affecting the UK bond market, as traders anticipate a potential leadership challenge to Prime Minister Keir Starmer by Manchester Mayor Andy Burnham later this year. The UK’s economic outlook is under scrutiny, with Chancellor Rachel Reeves and G7 finance ministers gathering in Paris on Monday to address the economic repercussions of the Middle Eastern conflict. Mohit Kumar, chief economist at Jefferies, highlighted investor concerns over a possible “shift to the left” in UK politics, which could exacerbate the fiscal situation already strained by limited capacity for increased public spending and unproductive tax hikes.
In Japan, bond yields increased, with the 10-year yield reaching an almost 30-year high of 2.8% on Monday, as the government prepared to issue new debt to mitigate the economic impact of the Middle Eastern conflict. European stock markets opened lower, with the Stoxx Europe 600 falling by 0.7%, while the UK’s FTSE 100 remained relatively stable. In Asia, Japan’s Nikkei and Hong Kong’s Hang Seng index both declined by about 1%, whereas Shanghai’s SSE Composite saw a slight dip of 0.1%, and South Korea’s Kospi rose by 0.3%.