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Rising US borrowing costs and Middle East risk spark market turmoil

The article says US government borrowing costs have climbed to their highest level since 2007, while global central banks also tighten policy amid inflation fears tied to the Iran war and energy prices.

Reported · Written up by our desk · Trade & Tariffs

The Guardian Economics reports that renewed turmoil is spreading across global financial markets as the Middle East conflict intensifies, investors reassess the outlook for AI-linked growth, and pressure builds in government bond markets. According to the report, US borrowing costs have risen to the highest level since 2007, with knock-on implications for households and businesses worldwide. The piece also points to inflation concerns, saying fears are growing that the Iran war and higher energy prices will ripple into the broader economy, potentially requiring interest rates that could be recessionary. The report cites investor worries that Washington’s tax and spending plans could keep the US debt trajectory high, noting that debt levels are expected to move above $40tn. It also highlights valuation pressure, saying the S&P 500 is about 3% below an all-time high and the combined value of the “magnificent seven” tech stocks is more than $20tn. On policy, the Guardian Economics says the US Federal Reserve raised rates for the first time since 2023 and that other central banks are also tightening, including expectations for the Bank of England to raise rates multiple times before the end of next year, an ECB rate increase, and the Bank of Japan lifting its policy rate to a 31-year high. The article quotes Albert Edwards, a Société Générale analyst, warning of how an oil price shock could spread through the global economy and influence the path of interest rates.

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