Government bond markets around the world buckled on September 1 as renewed fighting between the US and Iran sent oil prices sharply higher and revived fears that central banks will have no choice but to keep raising interest rates. The US 10-year Treasury yield climbed to roughly 4.78%, its highest level since January 2025, while UK gilt yields blew past 5.25% and Germany s 10-year Bund yield reached 3.36%, a 15-year high. Brent crude oil jumped to between $91 and $94 per barrel following the first direct clashes between US and Iranian forces in over a month, reigniting concerns about supply disruptions through the Strait of Hormuz. Markets assigned a 65% to 74% probability of a Federal Reserve rate hike in September.
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