Major Governments Face Multi-Decade Borrowing Cost Highs as US-Iran Peace Hopes Fade

By Staff, Agencies

Borrowing costs for major governments including the US, UK, Germany, France, and Japan climbed to multi-decade highs on Tuesday as hopes for an end to the Iran war faded, raising concerns over inflation, energy prices, and mounting public debt.

The failed ceasefire between Washington and Tehran on Monday night, coupled with the lack of progress toward reopening the Strait of Hormuz, has intensified inflation concerns.

Meanwhile, US President Donald Trump’s threat to bomb Oman if it “gets in the way” of negotiations helped push oil prices above $91 a barrel, raising fears that higher energy costs could fuel inflation and keep interest rates elevated.

At the same time, governments are increasing defense spending, adding to fiscal pressures and expected borrowing across major European economies including Germany and the UK.

The yield on the 30-year US Treasury bond rose to 5.324% on Tuesday, its highest since June 2007, while the 10-year yield climbed to 4.736%. Japan’s 10-year government bond yield rose to 2.945%, its highest in three decades.

Meanwhile, the UK’s 10-year gilt yield reached 5.076%, while Germany’s 10-year bond yield climbed to its highest since 2011 and France’s equivalent hit a 16-year peak. Bond yields rise as debt prices fall.

AJ Bell’s Dan Coatsworth said rising long-term yields reflect not only expectations of higher inflation and interest rates but also concerns over elevated government borrowing and the risks associated with holding long-term debt.

With oil prices rising, inflation concerns growing, and governments facing heavier defense spending and debt issuance, borrowing costs across major economies are reaching multi-decade highs, adding further pressure to public finances.