$100 Oil Fuels a Global Bond Surge. Investors Fear Higher Inflation and Slower Growth.

Global bond markets came under renewed pressure Friday as oil prices hovering above $100 a barrel intensified fears that the latest energy shock could leave major economies facing an uncomfortable combination of stubborn inflation, weak growth and higher borrowing costs.

Germany's 10-year government bond yield, the benchmark for the euro area and traditionally considered one of the world's safer sovereign assets, crossed 3.5% for the first time since April 2011, according to LSEG data cited by CNBC.

In the United States, the 10-year Treasury yield edged higher Friday after breaking above 4.9% a day earlier for the first time in three years. The move carries consequences well beyond Wall Street because the 10-year Treasury helps influence borrowing costs throughout the economy, including mortgage rates and other forms of consumer and corporate credit.

The pressure was equally visible in Asia as Japan's 10-year government bond yield jumped about 6 basis points Friday and remained close to a 1996 high reached last week. Australia's 10-year yield climbed about 12 basis points, while South Korea's rose roughly 8 basis points.

Brent crude futures remained around $105 a barrel Friday despite easing from earlier levels, while European natural gas prices climbed to their highest since 2022. Continued disruption around the Strait of Hormuz and Red Sea, combined with reduced Saudi Arabian oil production, has raised concerns that elevated energy prices could persist rather than prove to be a temporary shock.

That is feeding directly into stagflation concerns, a particularly difficult scenario for central banks because policies designed to fight inflation can further weaken economic growth. The European Central Bank legitimized that concern Thursday when it raised its three key interest rates by 25 basis points, saying the Middle East conflict was continuing to generate inflationary pressure.

The ECB now projects headline inflation of 3% in 2026 and 2.5% in 2027, remaining above its 2% target for an extended period. The central bank also warned that higher energy prices are expected to gradually filter into food and underlying inflation. ECB President Christine Lagarde said policymakers would closely watch how the energy shock affects wages, inflation expectations and broader economic activity.

Bundesbank President Joachim Nagel added Friday that monetary policy may need to become "mildly restrictive" if elevated energy costs continue to push inflation higher. France's statistics agency INSEE this week lowered its 2026 growth outlook to 0.4%, from 0.7%, as inflation, weakness in construction and unusually severe summer heat weighed on activity.

INSEE estimated the heat waves alone could shave about 0.1 percentage point from annual French economic growth this year. However, British borrowing costs declined after data showed the economy expanded a better-than-expected 0.4% in July.