Government bond yields rose sharply across major markets as the escalating Middle East conflict threatened to keep energy prices and inflation elevated. Brent crude traded above $100 a barrel in recent days and was just below $106 on Friday morning, while the Strait of Hormuz remained effectively closed amid fighting between US forces and Iran. Yemen's Iran-backed Houthi rebels also attacked several Saudi energy targets and advanced toward the Bab el-Mandeb Strait, a key alternative route for global energy shipments. The European Central Bank (ECB), the eurozone's central bank, raised its deposit rate from 2.25% to 2.5% and warned that inflation could remain "well above target for an extended period," prompting investors to price in further rate increases. Germany's 10-year Bund yield reached around 3.5%, while equivalent yields were about 4.44% in France, 4.37% in Italy and 3.96% in Spain. The UK's 10-year gilt yield eased toward 5.35% after reaching 5.378% on Thursday, its highest level since 2007. Twenty- and 30-year gilt yields reached 5.895% and 5.948%, their highest levels since 1998. In the United States, the 30-year Treasury yield rose above 5.38%, its highest level since 2007, while the 10-year yield approached 5% and traded around 4.95%. The move was reinforced by higher US wholesale inflation and a disappointing Treasury bond buyback of $5.2 billion against a $6 billion cap, with investors offering $10.5 billion. Japan's 10-year government bond yield rose to around 2.98%, close to the 3% level reached earlier this month for the first time since 1996. Bond markets are also absorbing a surge in artificial intelligence-related borrowing: major hyperscalers (large-scale cloud computing companies), including Alphabet and Amazon, have issued more than $200 billion in debt in 2026, according to LSEG data reported by Reuters. A broader Goldman Sachs estimate put AI-related issuance, including data-center and other infrastructure debt, at nearly $500 billion by early August. ECB researchers said rising technology-company issuance could eventually lift borrowing costs across sectors, although they found no evidence of such spillovers in the eurozone at the time of their analysis.