Rising tensions in the Middle East have once again influenced global markets, causing an increase in oil prices and instability in bond markets on Monday. Brent crude, the international oil benchmark, climbed significantly after an attack on a nuclear facility in the United Arab Emirates. The spike came amid stalled peace negotiations between the United States and Iran, now in their sixth week of a ceasefire. Former President Donald Trump heightened tensions with a social media post warning Iran, “For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them. TIME IS OF THE ESSENCE!” This drove Brent crude up by as much as 1.77% to $111.16 a barrel, marking its highest point in nearly two weeks, before it settled back to $110 following Iran’s response to a new U.S. proposal.
The global bond market also reflected these geopolitical developments. The benchmark 10-year U.S. Treasury yield rose to 4.631%, a peak not seen since February 2025, before easing slightly to 4.599%. In the United Kingdom, political uncertainty added to market volatility. The 10-year gilt yield reached a high of 5.19%, exceeding an 18-year record set just days earlier, before dropping to 5.15%. Concerns over a potential leadership challenge to Prime Minister Keir Starmer by Manchester Mayor Andy Burnham added to the uncertainty, as traders speculated on potential shifts in government fiscal policy.
The UK’s bond market movements coincided with a meeting of G7 finance ministers in Paris, where they evaluated the economic fallout from the Middle East conflict. Mohit Kumar, chief economist at Jefferies, noted worries among bond investors about a possible “shift to the left” in UK policy, which could lead to increased public spending without the fiscal capacity to support it. Taxation has already reached levels where further increases might not yield additional revenue, Kumar pointed out. Kathleen Brooks, research director at XTB, suggested that UK bond yields might recover if the market perceives Burnham as moving away from high-spending policies.
Meanwhile, Japan’s bond yields surged, with the 10-year yield hitting a nearly 30-year high of 2.8% as the country 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 index dropping by 0.7%, while the UK’s FTSE 100 remained relatively stable. In Asia, Japan’s Nikkei index declined by around 1%, Hong Kong’s Hang Seng index decreased by 1%, and Shanghai’s SSE Composite edged down by 0.1%, whereas South Korea’s Kospi closed 0.3% higher.