Global stock markets end turbulent week lower as surging bond yields, rising oil prices and US-Iran tensions intensify inflation fears

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Global stock markets ended a difficult week under pressure as investors confronted a combination of rising government bond yields, higher oil prices and renewed concerns about inflation, despite a late recovery on Wall Street. Japan's Nikkei lost around 4% over the week, while Europe's STOXX 600 declined about 1%. US markets were also lower on a weekly basis, although the S&P 500, Nasdaq and Dow Jones all recovered on Friday.

A major source of concern has been the global bond market. The 30-year US Treasury yield reached around 5.34% during the week, its highest level since 2007, as investors questioned America's fiscal outlook and worried about persistent inflation. Higher bond yields can make shares less attractive while also increasing borrowing costs for companies.

Oil added another layer of uncertainty. Brent crude approached $95 a barrel, supported by continuing US-Iran tensions and concerns about prolonged disruption around the Strait of Hormuz, a crucial route for global energy supplies.

According to Reuters, George Saravelos, Deutsche Bank's Global Head of FX Research said, "Bond markets have become the new volatility epicentre."

US Treasury Secretary Scott Bessent has attempted to calm markets by expanding Treasury bond buybacks. However, investors remain uncertain about whether those measures can sustainably lower long-term borrowing costs given America's fiscal position. US government debt has now exceeded $40 trillion.

Attention is now shifting towards Nvidia's quarterly earnings and the Federal Reserve's Jackson Hole symposium, which could provide fresh signals about AI-related corporate growth and the future direction of US interest rates.