According to media research, since the conflict between the United States and Iran began in February, the increase in global bond yields has added tens of billions of dollars to borrowing costs for the world's major developed economies. An analysis of government bond issuance data by media outlets reveals that Group of Seven nations have locked in an additional $16 billion in sovereign debt financing costs since the start of the war. If yields continue to climb, these countries could face roughly $34 billion more in financing expenses by the end of the first quarter of next year.

Currently, government bonds across almost all maturities in every G7 country are trading at yields higher than their February levels, pushing up the cost governments must pay to issue new debt. The United States has borne the largest share of the cost increase so far, estimated at $10.6 billion. The U.S. is not only the largest economy among the G7 but also the world's biggest sovereign bond market. Should yields keep rising through the end of the first quarter of 2027, the U.S. would pay an additional $21.7 billion in interest expenses.

U.S. bond yields have climbed sharply in recent weeks. Investors are increasingly worried about the nation's expanding public debt burden and whether policymakers can rein in the inflation surge sparked by President Trump's decision to go to war with Iran. Despite attempts by U.S. Treasury Secretary Scott Bessent to push yields lower by increasing government purchases of long-term bonds, they have continued to move higher.

Energy-importing nations such as the United Kingdom, Italy, Germany, and Japan have also felt the impact. With inflation expectations rising due to the energy supply crisis triggered by the closure of the Strait of Hormuz, borrowing costs in these countries have been further pushed upward. According to media calculations, the other G7 countries currently account for just over one-third of the total cost increase.

The $16 billion figure is derived from comparing actual borrowing costs with pre-war interest rates. The $34 billion estimate takes into account debt issuance plans published by national finance ministries, combined with the issuance patterns of bonds across different maturities in each country, to forecast future financing needs. Although these increases remain modest relative to overall government spending commitments, they will further squeeze already-strained government balance sheets.

Mohit Kumar, chief European economist at Jefferies, warned: "Rising interest rates are one of the biggest risks facing equity and credit markets... We are entering a phase where further rate increases will adversely affect both stock and credit markets simultaneously." He added that if rates continue to rise and the key U.S. 10-year Treasury yield breaks above 5%, then "the stock market should see a negative reaction." This is because higher bond yields diminish the relative appeal of stocks, while higher borrowing costs squeeze corporate profits.

He said: "As governments adopt expansionary policies, global fiscal deficits are on the rise... Furthermore, with the U.S. midterm elections and multiple European parliamentary elections approaching, we may also witness populist policies." He added that in a higher-rate environment, cutting fiscal deficits would become "more difficult."

Economists have warned that multiple factors could push bond yields even higher. Adam Posen, president of the Peterson Institute for International Economics, stated: "Beyond inflation risks, there are real political stability risks in the U.S., France, Japan, intermittently the U.K., and possibly Germany. Add geopolitical factors, and that constitutes another genuine risk." Posen added: "Increased defense spending, demographic-related demand growth, higher infrastructure expenditure, and the rise in green spending outside the U.S. will all put upward pressure on real interest rates."

The artificial intelligence infrastructure construction boom could also crowd out investment in other financial instruments such as sovereign debt, further driving up yields. Rising government bond yields may also reflect stronger investor expectations for economic growth. James Knightley, chief global economist at ING, noted that rising borrowing costs "not only affect fiscal sustainability, but in the U.S., they are already beginning to dampen economic activity by pushing up borrowing costs for households and businesses."

He said: "The U.S. housing market has already stalled, and the steepening yield curve means we should prepare for mortgage rates to rise above 7%." He added that solid economic growth prospects support valuations of risk assets such as stocks, while simultaneously reducing investor demand for safe-haven assets like U.S. Treasuries. Meanwhile, U.S. Treasuries are also under pressure from fiscal concerns and heavy corporate bond issuance, especially from so-called AI "hyperscalers."

Michel Martinez, chief European economist at Societe Generale, stated that this trend reflects "a repricing in a world where capital is no longer so abundant." He said: "Sovereign borrowing is increasingly competing for savings with the AI-driven investment boom, as well as other structural spending needs such as defense, energy transition, and reindustrialization." However, he pointed out that in the U.S., Germany, and Japan, bond yields are not particularly high relative to nominal GDP growth rates.

Gianluca Salford, head of European rates strategy at Morgan Stanley, said this trend is moving markets "closer to the world we used to know" — that is, back to the era before the 2010s' low-growth, low-inflation, and low-rate environment. He said: "There are indeed some challenges, but I don't agree with calling it a structural phenomenon. It's not something that can't be managed... Sometimes a certain degree of crisis is needed. But in many cases, countries take the right actions and stay on the right track because there is essentially no credible alternative."