Oil spike drives bond selloff, raises Fed hike fears — Tuesday 19 May 2026Rising oil prices linked to ongoing tensions in the Middle East are rippling through global financial markets, triggering a selloff in bonds and heightening expectations that the US Federal Reserve could step up its pace of interest rate increases. Analysts note that crude benchmarks have climbed sharply in recent sessions as supply concerns mount, pushing investors to shed government debt in favor of assets seen as better hedges against inflation. This shift has driven benchmark yields higher, with the 10-year US Treasury note briefly touching levels not seen in months. The move is raising alarms among economists who warn that faster Fed tightening would lift borrowing costs across the board, from mortgages to corporate loans. Markets in Europe and Asia have already felt the effects, with equity indexes showing increased swings and currencies in energy-importing nations coming under pressure. Central banks outside the United States, from the European Central Bank to policymakers in emerging economies, are now weighing whether to follow the Fed’s lead or risk capital outflows if rate differentials widen further. For households and businesses worldwide, the combination of higher energy costs and elevated interest rates could dampen spending and investment at a time when many economies are still recovering from earlier shocks. While oil-exporting nations may benefit from stronger revenues, the broader outlook points to prolonged volatility as investors reassess the balance between inflation risks and growth prospects.Watch the full video from Reuters below.