People walk past a mural depicting a U.S. aircraft carrier under missile attack in Tehran, on Sunday.Vahid Salemi/The Associated Press
Government bonds remained under pressure Monday on fears that the impasse over the opening of the Strait of Hormuz will keep boosting energy costs, stoking inflation. Some economists predict a global recession unless oil flows restart from the Persian Gulf.
The impasse triggered another outburst from U.S. President Donald Trump. On Sunday, he used a social media post to threaten Iran once again. “For Iran, the Clock is Ticking and they better get moving, FAST, or there won’t be anything left of them,” he wrote.
Mr. Trump is set to meet his top national security advisers on Tuesday to discuss options for renewed military attacks on Iran, according to various reports.
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On Monday, 10-year German bond yields reached 3.193 per cent, the highest since 2011, according to data from London Stock Exchange Group. Ten-year British government bond yields hit their highest level since 2008, with yields at 5.18 per cent, a climb of 0.6 percentage points since the start of the year.
But the sell-off of U.S. bonds waned a bit on Monday. The yield on 30-year U.S. Treasuries lost a few basis points after ticking up to their highest level since 2023 earlier in the day (100 basis points equals one percentage point). The slight price recovery appeared to be triggered by reports that the U.S. proposed a temporary waive on oil sanctions on Iran.
The U.S. and Israel began attacking Iran on Feb. 28. The Strait of Hormuz, through which one-fifth of the world’s oil and liquefied natural gas passes, has been largely closed since then. Soaring pump prices have sent Mr. Trump’s approval ratings plummeting. A new New York Times/Siena poll put the rating at 37 per cent – a new low for the President’s second term in the White House.
A ceasefire has been in place since April 8.
The possibility of renewed attacks on Iran sent oil prices up on Monday. In London trading, Brent crude, the international benchmark, finished the day up 1.7 per cent, to US$111 a barrel – an increase of 70 per cent over one year. Before the war started, Brent was trading at less than US$70.
Inflation rates have been rising, pushing up the cost of debt, including mortgage rates. The U.S. Treasury last week issued bonds with a yield of 5 per cent for the first time since 2007.
Vessels are seen anchored in the Strait of Hormuz, off the port city of Khasab on Oman's northern Musandam Peninsula, on Sunday.-/AFP/Getty Images
Some economists think the inflation surge will continue as high energy costs ripple through economies. The closure of Hormuz is also pushing up the price of other commodities, including nitrogen-based fertilizers, sulphur, methanol, aluminum and helium, which plays a crucial role in the production of semiconductors and the operation of MRI scanners.
On Friday, the Survey of Professional Forecasters, a group of top economists polled each quarter by the Federal Reserve Bank of Philadelphia, predicted that consumer price inflation would hit 6 per cent in the first quarter of next year. The survey’s earlier forecast, made just before the start of the war, had put inflation gain at just 2.7 per cent.
Mortgage rates, which are usually priced off bond yields, are climbing, adding to Mr. Trump’s popularity woes as the Republican party heads into the Congressional midterm elections in November.
For a 30-year mortgage in the U.S., the rate has climbed 0.36 percentage points to 6.36 per cent, which is higher than they were in September, 2025, when the Federal Reserve began cutting rates. In Germany, rates have climbed by about 0.3 percentage points. In Britain, the increase has been even greater, with two-year fixed mortgage rates at 5.1 per cent in April, up from just under 4 per cent at the end of February. The sharp rise increases homeowners’ mortgage financing costs by more than a quarter.
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Economists are no longer ruling out a recession in some countries, or even globally.
In an interview with The Globe and Mail on Monday, Karim Abadir, an economist at Imperial College London and the American University in Cairo, said he expects a recession in the medium term, since the Hormuz crisis remains intact.
“Yes, I am expecting a recession,” he said. “Western financial markets, especially in the U.S., have been overly optimistic about a resolution of the Iran conflict. The mentality of retail investors ‘buying the dip’ has been masking deeper unease by professionals who have been reducing their positions.”
Nouriel Roubini, the economist who called the financial crisis of 2007 and 2008, said in a recent comment article for Project Syndicate that investors seem to be overly optimistic that a U.S.-Iran peace deal is imminent.
He said that if fighting were to resume, and Iran were to retaliate by tightening its grip on Hormuz and inflicting more damage on Gulf oil and gas sites, “oil prices would spike closer to [or even above], US$200 per barrel, and we could be looking at 1970s-style stagflation, a global recession and a bear market for equities.”