Global government bond markets sold off sharply on Thursday after oil prices jumped 6% to above $107 a barrel, reviving fears that inflation will stay higher for longer and forcing central banks to keep interest rates elevated. The renewed turmoil, layered on top of existing worries about unsustainable government borrowing, followed reports that Houthi rebel advances along Yemen's Red Sea coast could disrupt Saudi crude exports, compounding pressure already building from the ongoing Iran conflict.

The sell-off pushed UK 10-year gilt yields above 5.37%, the highest since 2007, piling pressure on chancellor John Healey ahead of his first budget on 28 October, while petrol prices have risen 6p a litre since the start of September. In the US, 10-year yields rose to 4.92% and 30-year yields hit their highest since 2007, even after Treasury secretary Scott Bessent bought back $6bn of debt in an attempt to calm markets. The European Central Bank raised rates to 2.5%, with president Christine Lagarde warning inflation would be "longer lasting than we had anticipated", and attention now turns to the Federal Reserve's meeting next week under new chair Kevin Warsh, where markets expect a rate rise despite Donald Trump's repeated calls for cuts.