From Europe to Asia, bond markets plunge as oil vaults above $115

Core Viewpoint - The ongoing U.S.-Israeli war with Iran has led to a significant increase in oil prices, causing global bond markets to decline as investors react to inflation concerns and potential central bank responses [1][2]. Group 1: Oil Market Impact - Oil prices surged by as much as 28% to nearly $120 per barrel, the highest level since July 2022, due to supply cuts from major oil producers and fears of shipping disruptions through the Strait of Hormuz [2]. - Brent crude oil was reported to be up 16% at around $107 per barrel [2]. Group 2: Bond Market Reaction - Government bond yields increased sharply as prices fell, with investors now anticipating two rate hikes from the European Central Bank by year-end, a significant shift from previous expectations of a rate cut [5]. - The UK experienced the most significant selling pressure, with two-year yields rising nearly 40 basis points, marking the largest daily increase since the economic plan of former Prime Minister Liz Truss [6]. - In Germany, yields rose by 11 basis points, reaching the highest level since July 2024, following a previous increase of around 30 basis points [6]. Group 3: Central Bank Expectations - Investors are now pricing in a potential rate hike from the Bank of England, which was previously seen as likely to cut rates in March [5]. - Expectations for Federal Reserve rate cuts have been delayed as inflation concerns take precedence [5].