Global bond yields surge as oil prices hit four‑month high, raising inflation fears
Brent crude climbed above $109 a barrel amid Gulf tensions, pushing US Treasury yields to three‑year highs and triggering a sell‑off in equity markets worldwide.
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Desk Analysis
How This Affects the Exchange
Sector Effect
Negative · Do not buy
Higher global yields and inflation risk weigh on PSX valuations, though oil‑and‑gas firms may benefit; overall bias is Don't buy.
Sectors & Direction
Desk read
Desk call: Do not buy · Negatively affected
- Oil & GasNegatively affected
- BanksNegatively affected
- PowerNegatively affected
- CementNegatively affected
- SteelNegatively affected
- PharmaNegatively affected
Companies
Mentions in This Briefing
Sectors: Oil & Gas, Banks, Power, Cement, Steel, Pharma — Negative · Do not buy. PSX tickers: MEBL, MCB, UBL, HBL, BAHL, FABL. Higher global yields and inflation risk weigh on PSX valuations, though oil‑and‑gas firms may benefit; overall bias is Don't buy.
Full Story
Open on Business Recorder## Oil prices spike on Gulf tensions
Brent crude rose to $109.97 a barrel on Friday, a four‑month peak, after a 6% jump overnight. The surge was driven by restricted oil flows through the Strait of Hormuz following renewed attacks between the United States and Iran, and the Houthi seizure of Yemen’s Mocha port, which threatens Saudi exports in the Red Sea. Analysts at RBC Capital Markets warned that a full‑scale Saudi‑Houthi conflict could push Brent to $122 a barrel later this year.
## Bond markets react sharply
Global bond yields hit fresh highs. The US 10‑year Treasury yield rose 2 basis points to 4.9708%, just below the psychologically important 5% level, while the 30‑year yield reached 5.3803%, a 19‑year peak. Asian sovereign yields also climbed, with Australia’s three‑year government bond hitting a 15‑year high of 5.047% and Japan’s 10‑year yield rising to 2.97% after data showed stubborn wholesale inflation.
## Equity markets slump
Higher yields and inflation worries dragged equity markets lower. MSCI’s broad Asia‑Pacific index (excluding Japan) fell 1.8%, Japan’s Nikkei dropped 2.8%, and Chinese blue‑chips slipped 1.2%. In the United States, Nasdaq futures were down 0.2% and S&P 500 futures were largely unchanged.
## Central banks brace for more tightening
Investors priced in a roughly 70% chance of a US Federal Reserve rate hike this month, while JPMorgan expects eight of the nine major central banks to raise rates by year‑end. The European Central Bank raised rates for a second time this year, and officials hinted at further tightening in October.
## Implications for Pakistan
Higher global yields raise financing costs for Pakistani corporates and the government, potentially pressuring the PKR and dampening investor sentiment on the PSX. Conversely, the oil price rally could benefit domestic oil‑and‑gas companies, improving their earnings outlook.
## Currency and commodity moves
The US dollar strengthened 0.4% against major peers, while gold edged up 0.3% to $4,328 an ounce after a brief decline.
*All figures are based on market data released on 13 September 2024.*