TEHRAN- The US-Israel military offensive against Iran has sent shockwaves through global bond markets, triggering extreme volatility in government borrowing costs throughout May and inflicting heavy losses on investors.

According to Reuters, sovereign bond yields surged to multi-decade highs during the month as traders scrambled to reassess inflation and central bank policy amid escalating West Asia tensions.

The benchmark 30-year US Treasury yield climbed to around 5.2% on May 20 – its highest level since 2007 – as concerns over stalled peace talks and oil prices spiking above $110 per barrel fuelled fears that inflation will remain dangerously high for months to come.

The damage extended far beyond the United States. British government bond yields soared to their highest levels in decades, Japanese yields touched record highs, and Germany’s 10-year yield rose to levels unseen since 2011. Long-dated UK gilts reached their most expensive borrowing costs since 1998, reflecting deep unease over the fiscal consequences of the conflict.

Analysts say the attack has worsened already fragile fiscal conditions, particularly in the US, where rising real yields signal that investor concerns go beyond inflation. The prolonged uncertainty has also undermined confidence in central bank policy credibility.

While hopes for peace later offered brief relief, UK bond yields remain significantly higher than before the conflict began – a stark reminder of the lasting economic scars inflicted by the US-Israel assault on Iran. The turmoil in May underscores how military aggression in the West Asia directly punishes global debt markets, raising borrowing costs for governments and businesses alike.