A second round of US strikes on Iran within three days drove Brent crude to nearly $95 per barrel and WTI above $90, sparking a broad global bond selloff that pushed the US 10-year Treasury yield to approximately 4.80–4.81% — its highest level since late 2023 — and the 30-year to around 5.28%, near 19-year highs. This energy-driven inflation shock reinforced hawkish central bank rhetoric, with Fed Governor Michael Barr explicitly signalling openness to a September rate hike if inflation fails to moderate quickly, while Eurozone CPI rising above 3% in August has markets pricing a near-term ECB 25 basis point hike. The compounding of geopolitical risk premium in oil, rising term premiums in bonds, and a higher-for-longer rate narrative drove a clear risk-off rotation globally, with defensives and energy outperforming while technology, industrials, and consumer discretionary bore the brunt of the selloff. The VIX surged 9.52% to 16.34, confirming a meaningful step-up in near-term hedging demand even as the absolute level remains contained.
For Asia-Pacific markets, the implications are unambiguously challenging: higher US yields compress equity multiples for growth-heavy indices, rising oil prices import inflationary pressure across energy-dependent economies including Japan and South Korea, and the geopolitical premium in crude adds a persistent tail risk to the regional outlook. Japan's 10-year JGB yield approached 3% — its highest since 1996 — signalling that even the Bank of Japan's policy framework is being stress-tested by the global bond rout, while the Nikkei VIX eased 6.65% to 25.98, suggesting some overnight stabilisation in Japanese volatility expectations. The ASX 200 closed down just 0.10% on Tuesday — a relatively resilient session — but Australian investors open their platforms today facing elevated oil prices that are a double-edged sword: supportive for domestic energy producers but inflationary for the broader consumer and a complication for the RBA's already delicate policy calculus ahead of upcoming Australian GDP data.