1040 GMT - Middle Eastern investors are turning toward domestic priorities amid the conflict in the region, reducing financing sources for governments outside the region, BlackRock Investment Institute says in a note. "Greater sovereign borrowing and persistent fiscal deficits, alongside a shift in Middle Eastern investment toward domestic priorities, have reduced capital available for overseas investment and further intensified competition for capital," it says. Scarcity-driven inflation, amplified by the Middle East energy and commodity shock, has driven a sharp repricing of markets' Federal Reserve rate expectations from easing to tightening, prompting a global rise in bond yields, BlackRock says. Market uncertainty about the Fed's reaction function under the new Chairman Kevin Warsh has also pushed the term premium higher, the asset manager says.