Global Bonds Sell Off and Oil Prices Rise as Markets React to Geopolitical Developments

Government bonds around the world sold off sharply on Friday as the price of oil jumped. Both moves were driven by developments tied to the Iran war, politics and trade. The yield on the 30-year U.S. Treasury bond rose above 5.12 percent, its highest level in nearly a year.

If it closes above that level it would mark the highest close since 2007. On Wednesday the Treasury sold 30-year bonds above 5 percent for the first time since 2007. The 10-year Treasury note yield also rose to nearly 4.56 percent, its highest level since mid-May of last year.

U.S. crude oil rose more than 4 percent to above $105 a barrel, bringing its gain for the week to more than 9 percent. International Brent crude increased nearly 3.5 percent to over $109 a barrel and has gained 7 percent this week. The moves gained momentum as discussions continued over a summit with Chinese officials in Beijing that has produced few major trade agreements.

Stocks dropped in early trading with the S&P 500 sliding 1 percent, the Nasdaq Composite falling 1.3 percent and the Dow Jones Industrial Average declining 430 points. The rise in oil threatens to push retail gas prices higher while higher bond yields could lead to increased consumer lending rates.

As of Friday morning the average price of unleaded gas remained above $4.50 a gallon, up 51 percent since the Iran war began on Feb. 28. The closure of the Strait of Hormuz has halted vessel traffic that previously carried more than 20 percent of the world's daily energy supply.

Oil prices have surged more than 80 percent this year. The Consumer Price Index for April reached 3.8 percent, its highest level in three years, while an index measuring wholesale prices hit 6 percent last month.