Bond selloff pressures stocks as oil crosses $91 a barrel

Global bond yields reached record highs on Tuesday as Middle East conflict intensified, driving oil prices beyond $90 a barrel. The 10-year US Treasury yield surged 2.2 basis points to 4.78%, near a 20-month peak. Japan’s 10-year benchmark drew close to 3%, a level unseen in a generation. US futures stabilized after modest declines in Wall Street indexes, but investors remained cautious ahead of Friday's U.S. jobs data, which could prompt the start of an interest rate hiking cycle.

Higher oil prices and escalating US-Iran tensions have raised inflation concerns, negatively impacting bonds, as Federal Reserve Chair Kevin Warsh hinted at potential policy shifts. A BNY Macro Strategist noted that hawkish monetary policy, geopolitical risks, and rising fiscal concerns are pushing up global term premiums and long-end yields.

Stock markets worldwide faced a downturn, with Japan's Nikkei down 0.2% and the Hang Seng falling 0.7%. Germany and France recorded their highest long bond yields in 15 years, while bund futures hit a 15-year low in Asian trade. Brent crude futures surged past $91 a barrel in Asian trading, and Europe's gas price hit a 3-1/2-year high.

Hikes in the U.S. and Japan are considered likely this month. Geopolitical tensions, including US threats against Iran and Russia-Ukraine hostilities, are exacerbating the situation. The euro and yen remained stable against the dollar. Hong Kong's Shein shares dropped in early trade, trading near a discounted offer price following recent fundraising rounds.

The company, known for affordable clothing, faces challenges due to U.S. and European tariffs and duty changes.