Mirian Gom 
ABUJA, Nigeria – Global oil prices climbed more than 2%, extending weekly gains to around 10%, after fresh US military strikes on an Iranian island in the Strait of Hormuz triggered retaliatory attacks by Tehran, raising fears of prolonged disruptions to global energy supplies and renewed inflationary pressure.
The escalation in the US-Iran conflict rattled financial markets on Wednesday, sending stocks lower across Asia while government bond yields climbed to multi-decade highs as investors increased expectations of further interest rate hikes by major central banks.
The latest military exchange follows weeks of stalled diplomatic efforts, with Washington reiterating its goal of achieving the “economic asphyxiation” of Iran. Tehran responded by targeting American military interests across the Middle East after the renewed US strikes.
The Strait of Hormuz, through which roughly one-fifth of the world’s oil and liquefied natural gas shipments pass, is now effectively closed for the foreseeable future, fuelling concerns over global energy security and inflation.
Rising energy prices have intensified fears that central banks, particularly the US Federal Reserve, may keep interest rates higher for longer to contain inflation.
Government borrowing costs surged globally as investors sold bonds. The yield on 30-year UK government bonds reached its highest level since 1998, while UK 10-year gilt yields climbed to levels last seen during the 2007-08 global financial crisis.
Japan’s 10-year government bond yield also hit a 30-year high, while US Treasury yields approached financial crisis-era levels.
“Bond yields were already rising, and the renewed US-Iran attacks and their impact on oil prices have made investors more concerned about bonds,” said Rajeev De Mello of Gama Asset Management.
“At these levels, higher yields are clearly a headwind to Asian equities, especially longer-duration tech stocks.”
Asian markets closed broadly lower, with technology shares leading declines in Tokyo and Seoul. Hong Kong, Shanghai, Sydney, Singapore, Wellington, Taipei and Manila also posted losses after Wall Street’s three major indexes ended the previous session in negative territory.
Investors are now awaiting key US employment and inflation data due over the coming week, which could influence the Federal Reserve’s policy decision at its next meeting.
According to Bloomberg, traders are pricing in about a 70% probability that the Fed will raise interest rates.
Federal Reserve Governor Michael Barr reinforced those expectations, saying policymakers must remain prepared to tighten monetary policy if inflation fails to ease.
“If inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates,” Barr said.
Meanwhile, Iran launched missile and drone attacks against US military assets across the region, including bases in Jordan, Bahrain and Iraq’s Kurdistan region.
Iranian media reported ballistic missile strikes on two US bases in Jordan, although the Jordanian military said it intercepted 10 missiles and reported no confirmed casualties.
Air raid sirens also sounded in Bahrain, while Kuwait said its armed forces responded to Iranian drone and missile activity.
Iran’s Revolutionary Guards claimed they struck US military facilities in Iraq’s Kurdistan region, destroying warehouses, maintenance centres and military equipment.
The latest escalation began after US forces resumed strikes on Iranian targets on Sunday, followed by additional attacks on Tuesday targeting locations along the Strait of Hormuz, including areas in southern Iran and Kerman Province.
Iranian state media reported multiple casualties from the latest US strikes, including seven deaths in Khuzestan Province and additional fatalities in Hormozgan Province.
The US military denied deliberately targeting civilians.
“The US military never targets civilians, unlike the IRGC,” said US Central Command spokesman Tim Hawkins, referring to Iran’s Islamic Revolutionary Guard Corps.
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Hope Ajayi 