Global bond yields rise and oil tops $90 as US-Iran ceasefire talks collapse

Breakdown of ceasefire talks

The 60-day negotiating window established under the June 17 interim ceasefire between the United States and Iran has expired without a permanent diplomatic settlement. Washington ruled out extending the agreement, prompting Tehran to declare on Tuesday that it is moving to a fully offensive military posture. A senior Iranian official stated that Tehran is prepared to launch targeted strikes against the American naval blockade if diplomatic channels fail. U.S. President Donald Trump had already declared the pact over on July 7 and recently threatened military action against Oman over negotiations surrounding maritime access. The standoff leaves the Strait of Hormuz largely shut, keeping regional security risks elevated.

Global bond selloff and inflation pressures

Long-term government borrowing costs across the United States, Europe and Japan climbed to multi-decade peaks on Tuesday as energy prices and fiscal deficits weighed on investor sentiment. The yield on the 30-year U.S. Treasury bond rose to an intraday peak of 5.327%, marking its highest level since 2007. In Japan, 10-year government bond yields reached a 30-year peak of 2.945%, while 10-year yields in Germany and France reached levels not seen since 2011 and 2009 respectively. Rising bond issuance from corporate AI hyperscalers and expanding sovereign budget deficits have contributed to the selloff alongside shifting expectations around the Federal Reserve under Kevin Warsh. Investors are demanding higher yields to absorb new debt issuances across international markets.

Charu Chanana, chief investment strategist at Saxo Bank in Singapore, outlined the changing dynamics across sovereign debt markets.

The market is demanding a higher term premium for holding long-duration government debt.

Vasu Menon, managing director of investment strategy at OCBC, recommended that investors adjust their exposure to manage the volatility.

Rising long U.S. bond yields is a risk that investors must bear in mind going forward... bond investors are best placed to manage this risk by focusing more on shorter duration bonds.

Maritime shipping and energy supply strains

Brent crude traded above $90 per barrel as tanker traffic through the Persian Gulf remained severely restricted. State-controlled Chinese shipping operators COSCO Shipping Energy Transportation and China Merchants Energy Shipping have avoided both the Strait of Hormuz and the Bab al-Mandeb chokepoint since late July following consultations with authorities in Beijing. The two carriers, which control more than 100 very large crude carriers, have diverted supertankers to longer Atlantic routes and begun collecting crude cargoes outside the Gulf. In Iran, annual inflation surpassed 80% in July, and crude exports dropped to 294,000 barrels per day in August compared to 1.7 million barrels per day in 2025. In the United States, retail gasoline averaged $4.06 per gallon on Monday, representing a 29% increase over the prior year.

Industrial trade and export adjustments

Supply constraints originating in the Persian Gulf have reshaped trade flows for energy and raw materials across Asia and Europe. To ease domestic pressure and support foreign buyers, Chinese authorities relaxed fuel export quotas in July and August after implementing sharp restrictions in March. Refined oil exports from China reached 4.65 million metric tons in July, driven by an 88% month-on-month surge in diesel shipments to 810,000 tons. Concurrently, Chinese smelters expanded shipments of processed aluminium to compensate for lost Middle Eastern output, exporting 3.2 million tons of semi-manufactured products during the first six months of 2026.