Japanese government bonds suffered a sharp decline on Friday, tracking the wave of selling that swept through the US Treasury market after escalating tensions in the Middle East pushed oil prices upward. The 10-year Japanese government bond yield climbed 7.5 basis points to 2.985%, while the 20-year yield rose 7 basis points to 3.82%.

Across the region, Australia's 3-year government bond yield spiked as much as 20 basis points to 5.05%, marking its highest level since 2011. Meanwhile, New Zealand's 2-year bond yield advanced by 24 basis points. The selloff in US Treasuries intensified on Thursday as surging oil prices stoked inflation concerns, compounded by the Treasury Department's first expanded buyback operation coming in below market expectations. With the closely watched US inflation data on the horizon, the benchmark 10-year Treasury yield is now approaching the critical 5% threshold.

"Rising overseas yields, driven by higher oil prices and inflation worries, could push Japan's 10-year yield above 3% as well," noted Eiichiro Miura, senior investment manager at Nissay Asset Management. "Should the Bank of Japan signal the possibility of two rate hikes by year-end at next week's meeting, it could prove supportive for long-dated Japanese bonds."