Oil jumps as Middle East tensions rattle bonds

Oil prices rose and global government bond markets swung on Monday as tensions in the Middle East and uncertainty in British politics fed fresh inflation worries and rate-hike expectations.

Brent crude, the international benchmark, was up as much as 1.77% at $111.16 a barrel early in the session, its highest level in nearly two weeks, after an attack on a nuclear power plant in the United Arab Emirates. The move came as U.S.-Iran talks aimed at ending the conflict were described as stalled.

Bond markets were choppy. The benchmark 10-year U.S. Treasury yield touched 4.631%, its highest since February 2025, before easing to 4.599%.

In the UK, the 10-year gilt yield climbed to 5.19%, topping an 18-year high set on Friday, before pulling back to 5.15%.

UK politics adds to gilt volatility

Part of the turbulence in British government debt was linked to political uncertainty. Market participants were anticipating a possible leadership challenge to Prime Minister Keir Starmer later this year, with Manchester Mayor Andy Burnham mentioned as a potential challenger.

Investors were also weighing concerns about a possible “shift to the left” in UK fiscal policy, a shorthand for higher public spending despite limited fiscal room, according to market commentary cited in the source material. Burnham, speaking over the weekend, said he supported the government’s fiscal rules and the need for a plan to reduce debt.

G7 meeting and broader market moves

The swings came as G7 finance ministers gathered in Paris to discuss the economic impact of the Middle East conflict, including the risk that higher oil prices could push inflation higher.

European stock markets opened lower, with the Stoxx Europe 600 down 0.7%. In Asia, Japan’s Nikkei fell about 1%.

Investors will watch this week’s developments in the Middle East and any signals from policymakers for further moves in oil, bond yields and equities.