Global Bond Yields Surge on Inflation Fears

Global stock and bond markets concluded a challenging week on Friday, May 15, 2026, as investors adjusted to expectations of rising interest rates amid slowing global economic growth. This market shift was primarily driven by persistent inflationary pressures, exacerbated by economic disruptions linked to the ongoing conflict in Iran.

U.S. Treasury yields reached their highest levels in approximately one year, reflecting market anticipation that the Federal Reserve would implement interest rate hikes to counter inflation fueled by energy price shocks. Concurrently, U.S. stock indexes opened with a decline of around 1%, mirroring broader global losses, including a 2% drop in Germany and 1.8% in Britain. The broad selloff indicated investor concerns that the Iran conflict would continue to negatively impact global economic output, particularly after a U.S.-China meeting failed to yield significant progress on the Middle East situation.

Yields across the euro zone also increased, with Italian 10-year bonds rising 11 basis points to approximately 3.89% and German Bund yields increasing almost 7 basis points to about 3.12%. Japanese bond yields reached record highs. Money markets now indicate a 60% probability of a Federal Reserve rate hike this year, a significant change from pre-conflict expectations of at least two rate cuts. This reflects a market realization of a more volatile inflation climate and concerns over the longer-term impact of price shocks.