Oil prices saw an uptick while global bonds experienced fluctuations on Monday, spurred by renewed tensions in the Middle East that sparked inflation concerns and expectations of interest rate hikes by central banks. Brent crude, a global oil benchmark, increased following an attack on a nuclear facility in the United Arab Emirates. This development coincided with stalled peace negotiations between the United States and Iran, now in their sixth week of ceasefire. Former U.S. President Donald Trump took to social media, urging Iran to expedite their actions with a stark warning: “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!”
Brent crude surged by up to 1.77% to reach $111.16 per barrel, marking its highest point in nearly two weeks, before settling back to $110 per barrel. This slight decline came after Iran announced its response to a new U.S. proposal aimed at resolving the conflict. Esmaeil Baqaei, spokesperson for Iran’s foreign ministry, confirmed that discussions were ongoing through a Pakistani intermediary, though specifics were not disclosed.
In the bond markets, volatility was evident. The yield on the 10-year U.S. Treasury briefly touched 4.631%, a peak not seen since February 2025, before slightly receding to 4.599%. Meanwhile, in the UK, the 10-year gilt yield reached 5.19%, surpassing an 18-year high set on Friday, before easing to 5.15%. Political uncertainties in the UK contributed to these fluctuations, with speculation that Prime Minister Keir Starmer might face a leadership contest from Andy Burnham, the mayor of Manchester, later this year.
UK Chancellor Rachel Reeves, alongside other G7 finance ministers, convened in Paris on Monday to deliberate on the economic repercussions of the Middle Eastern conflict. Mohit Kumar, Jefferies’ chief economist, noted investor apprehensions about a potential “shift to the left” in the UK government. He expressed concerns that increased public spending could occur despite limited fiscal capacity, with existing tax levels potentially stifling further revenue generation. Kathleen Brooks from XTB indicated a possible recovery in UK bond yields, contingent upon market perceptions of Burnham’s fiscal policies.
Meanwhile, Japan witnessed its bond yields rise, with the 10-year yield reaching nearly 30-year highs at 2.8%, as the government prepared to issue new debt to mitigate the war’s economic impact. Stock markets in Europe opened on a downward trend, with the Stoxx Europe 600 falling by 0.7%, while the UK’s FTSE 100 remained steady. Asian markets also reflected instability, as Japan’s Nikkei and Hong Kong’s Hang Seng both fell by about 1%, and Shanghai’s SSE Composite edged down 0.1%, though South Korea’s Kospi managed a 0.3% gain.