Bond selloff pressures stocks as oil crosses $91 a barrel

Global bond yields reached record highs on Tuesday amid heightened tensions in the Middle East and soaring oil prices. The 10-year U.S. Treasury yield surged to near 20-month peak of 4.78%. Japan's 10-year benchmark yield approached a three-decade low. U.S. stock markets suffered slight declines but traders remained cautious, anticipating Friday's U.S. jobs data that could trigger a possible start of interest rate hikes.

Higher oil prices and heightened U.S.-Iran conflict fueled inflation fears, which typically hurt bond values, as Federal Reserve Chair Kevin Warsh hinted at potential policy tightening if inflation remains persistently high. Analysts noted that the combined impact of hawkish monetary policy, geopolitical risks and inflation concerns were keeping term premiums and long-end yields high.

In Asia, Nikkei dipped 0.2% and Hang Seng fell 0.7%, pressured by flat sales performance of Chinese apparel retailer Shein Global. Long bond yields in Germany and France hit their highest levels in over 15 years, while German and French bond futures hit new 15-year lows. Brent crude futures rose above $91 per barrel in Asian markets, while Europe's gas price hit a three-and-a-half-year high.

Even though global interest rate hikes appear likely across countries, the rise in borrowing costs hasn't yet boosted the U.S. dollar significantly. Meanwhile, the euro and yen held steady. Upcoming inflation data from Europe would provide further clues on the macro outlook.