Europe’s sovereign bonds are facing “a perfect storm” after new inflation fears sparked by the Iran conflict forced the region’s central banks to signal a new course for interest rates on Thursday, sending yields soaring.

The Bank of England left interest rates unchanged at 3.75% on Thursday, with the European Central Bank also holding steady on borrowing costs, as the economic impact of soaring energy costs hangs over rate-setters.

Yields on 10-Year Gilts, the benchmark for U.K. government debt, rose more than 13 basis points to 4.871% — a new 52-week high on Thursday — before easing.  The yield on 2-Year Gilts, which are typically more sensitive to rates decisions, immediately surged 39 basis points in the biggest rise since former Prime Minister Liz Truss’s ‘Mini Budget’ in September 2022.  They were last seen 27 basis points higher, at 4.378%.

French, German and Italian bonds saw less severe selling pressure, but yields rose across the continent.

Market strategists say the BoE’s move — a unanimous call by its nine-member monetary policy committee — effectively ends hopes of any further rate cuts this year and dramatically shifts the policy outlook from where it was just two weeks ago.

Ed Hutchings, head of rates at Aviva Investors, said that the chances of a rate hike from the BoE over the coming months have increased.

“With this in mind, from an asset allocation perspective, we could start to see investors tactically adding overweights in gilts in the short-term, with at least one hike expected later in the year as of today,” Hutchings said.

Matthew Amis, investment director, rates management at Aberdeen Investments, described the unfolding environment as a “perfect storm” for Europe’s sovereign bond markets.

“Energy prices spiking higher and the Bank of England opening the door to potential rate hikes have seen gilts spike higher. German bunds are the relative calm in this storm but are still pushing 3% due to similar inflation fears,” Amis told CNBC via email.

“Gilts and bunds are pricing in a much longer conflict than other markets, focusing on the inflation surge with markets yet to focus on the potential negative impact on growth.”

Meanwhile, the ECB’s next move will now likely be a hike, according to Simon Dangoor, deputy chief investment officer of fixed income and head of fixed income macro strategies at Goldman Sachs Asset Management.

“The governing council is clearly sensitive to upside inflation risks, but will likely look to assess potential second-round effects before making a move,” Dangoor said. “A hike is therefore possible later in 2026; however, the ECB stands ready to act sooner if the situation deteriorates.”

U.S. President Donald Trump on Wednesday warned that if Iran continued targeting Qatar’s energy facilities, America would “massively blow up the entirety of the South Pars Gas Field.”

Tehran has attacked a key energy facility in Qatar after Israel bombed the South Pars Gas in Iran, signaling a sharp escalation in the conflict and sending energy prices soaring.

Qatar said Wednesday that Iranian missiles caused “extensive damage” at Ras Laffan Industrial City, home to the largest liquefied natural gas, or LNG, export facility in the world.

Trump also denied any prior knowledge of Israel attacking South Pars, pushing back against reports that the strike was coordinated with and approved by his administration.

In a social media post Wednesday night stateside, Trump said that “the United States knew nothing about this particular attack, and the country of Qatar was in no way, shape, or form, involved with it, nor did it have any idea that it was going to happen.”

Trump also urged Israel to end attacks on the South Pars gas field, unless Iran “unwisely” decides to attack Qatar. In that case, the U.S. will “massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before.”

The attack on South Pars — the world’s largest natural gas reserve, shared between Iran and Qatar — marked the first time Israel has targeted Iranian natural gas production infrastructure since the conflict began on Feb. 28.

Iran has fired ballistic missiles at Qatar’s Ras Laffan Industrial City, with ​QatarEnergy saying the attack had caused “extensive damage” warranting deployment of emergency response teams to contain fires at the site. No casualties were reported.

Separately, Reuters reported Thursday that the U.S. government was considering deploying thousands of U.S. forces to the Middle East, raising the prospect of further escalation.

As tensions spiral, world leaders are scrambling to contain the Middle East conflict amid fears of deepening the turmoil in global energy markets.

German Foreign Minister Johann Wadephul on Wednesday warned of a “crisis of the gravest order” if global supply chains continued to be disrupted, calling for a path toward de-escalation and a cessation of hostilities once U.S. and Israeli military objectives are achieved, according to local media reports.

The United Arab Emirates called the targeting of energy facilities linked to the South Pars field in Iran a “serious escalation,” posing “a direct threat to global energy security” with severe environmental repercussions.

The UAE Ministry of Foreign Affairs also called Iran’s targeting of its Habshan gas facility and Bab field a “terrorist attack,” risking a “dangerous escalation.”

Qatar’s foreign ministry spokesperson Majed al-Ansari described the Israeli strike on South Pars as “a dangerous and irresponsible step” amid escalating regional tensions.

The Gulf nation has declared Iranian military and security attachés and their staff at the Iranian embassy in Doha “persona non grata,” ordering them to leave the country within 24 hours.

Saudi Arabia’s Foreign Minister Prince Faisal bin Farhan Al Saud also appeared to toughen the tone, reportedly saying that “what little trust there was before with Iran has completely been shattered.” Both political and non-political responses to Iran remain on the table, he added.

Iran’s Islamic Revolutionary Guard Corps on Wednesday threatened to escalate hostilities by targeting oil and gas facilities in Saudi Arabia, the UAE, and Qatar.

In a post on X, Iran’s President Masoud Pezeshkian condemned the strikes on Iran’s energy infrastructure, saying that they “could have uncontrollable consequences, the scope of which could engulf the entire world.”

The attacks on Middle East energy production facilities have further deepened supply disruption triggered by the conflict. Brent crude May futures rose 4% to $111.77 a barrel as of 10:25 p.m. ET , while U.S. West Texas Intermediate futures for April climbed over 1.3% to $97.56 per barrel.

Oil tanker traffic through the Strait of Hormuz — a vital chokepoint for one-fifth of global oil supply and a significant share of LNG exports — has plunged since the war began, with the waterway effectively closed to most commercial shipping.

Israel’s Defense Forces said Wednesday that Iran’s Intelligence Minister Esmail Khatib had been killed in a “targeted strike” in Tehran, marking the third assassination of a high-ranking official in just two days.

“Khatib played a significant role during the recent protests throughout Iran, including the arrest & killing of protestors and led terrorist activities against Israelis & Americans around the world,” the IDF said in a post on social media.

“Similarly, he operated against Iranian citizens during the Mahsa Amini protests (2022–2023),” they added.

Iran has not yet commented on reports of Khatib’s death.

It comes after Israel said Tuesday that Iran’s top security official Ali Larijani and the commander of Iran’s Basij forces, Gholamreza Soleimani, had both been killed. Iran’s official judiciary news agency later confirmed the killing of Soleimani, the Associated Press reported.

According to AP, Iran’s Supreme National Security Council released a statement confirming Larijani was killed “along with his son Morteza Larijani and the head of his office, Alireza Bayat, as well as several guards.”

The IDF said Khatib was appointed to his position in 2021 by Iran’s late supreme leader, Ayatollah Ali Khamenei, who was killed in strikes aimed at high-ranking Iranian officials at the beginning of the war on Feb. 28.

Iran has since retaliated by attacking its Gulf neighbors and targeting ships trying to pass through the strategically vital Strait of Hormuz.

The U.S. and Israeli-led war against Iran entered its 19th day on Wednesday, with Israel launching a series of strikes on Lebanon’s capital of Beirut as it continues its offensive against Tehran-backed militant group Hezbollah.

Iran and its allied military groups have launched a series of retaliatory strikes across the Middle East, amplifying fears of a sprawling regional crisis.

Israeli Defense Minister Israel Katz said on Tuesday that Iran’s security chief, Ali Larijani, had been killed in airstrikes overnight.

Katz said in a statement that he had been informed by the military that Larijani and the commander of Iran’s Basij forces, Gholamreza Soleimani, had both been killed, according to Reuters.

Iran has not yet confirmed the report.

Larijani was seen as the right-hand man of Iran’s late supreme leader Ayatollah Ali Khamenei, who was killed in strikes aimed at high-ranking Iranian officials at the beginning of the war on Feb. 28.

Iran has since retaliated by attacking its Gulf neighbors and targeting ships trying to pass through the strategically vital Strait of Hormuz.

This is breaking news. Please refresh for updates.

Hello, this is Leonie Kidd writing to you from London. Welcome to another edition of CNBC’s Daily Open.

U.S. President Donald Trump continues to dominate the news cycle, and his latest round with reporters in the Oval Office has yielded more headlines and market moves this morning. It’s only Tuesday and already it’s been a volatile week for oil, which remains the epicenter of trading action.

Market participants — as well as us journalists — will need to stay on their toes to keep up with developments.

Oil prices jumped over 2% on Tuesday as uncertainty lingered over a U.S.-led coalition to protect shipping through the Strait of Hormuz. President Donald Trump suggested Monday that the coalition was not fully in place as he urged other countries to get involved.

Energy analysts and traders said Monday that they wouldn’t be surprised if oil prices climb to as high as $200 per barrel as the sprawling Middle East crisis drags on.

U.S. President Donald Trump said his planned trip to China later this month could be delayed as Washington sought to pressure Beijing to help reopen the Strait of Hormuz, underscoring a renewed flashpoint in an already fragile bilateral relationship.

In an interview with the Financial Times on Sunday, Trump said he expected China to help unblock the strait before he travels to Beijing for a summit with Chinese leader Xi Jinping, which had been scheduled for March 31 to April 2.

Trump added that the two weeks to the meeting were a “long time” and that Washington wanted clarity before then. “We may delay,” Trump told the FT, without elaborating on timing.

The remarks came as Treasury Secretary Scott Bessent met his Chinese counterpart He Lifeng in Paris for talks about the planned summit. Beijing has yet to confirm the dates and typically announces such plans closer to their scheduled start.

The visit would be the first for a U.S. president since Trump’s last trip during his first term in 2017. It also comes five months after the two leaders met in the South Korean city of Busan, where they agreed to a one-year truce in a trade war that had seen tit-for-tat tariffs briefly soar to triple-digit levels last year.

Chinese top diplomat Wang Yi said earlier this month that the agenda for the exchange was already “on the table.”

Trump said Sunday aboard Air Force One that China sourced about 90% of its oil through the strait, framing Beijing’s cooperation on Hormuz as a matter of self-interest. The president has appealed to several European and Asian countries, including China, to help open up the chokepoint through which roughly one-fifth of the world’s daily oil supply passes.

However, the numbers suggest Beijing may be more insulated from the closure than Trump’s comments implied.

China has spent the past two decades diversifying its energy sources and building strategic reserves to cushion the blow of any prolonged disruption.

Seaborne oil imports through the strait now account for less than half of China’s total oil shipments, according to Rush Doshi, director of the China Strategy Initiative at the Council on Foreign Relations. Nomura also estimated that oil flows through Hormuz represent just 6.6% of China’s total energy consumption.

Satellite imagery tracked by maritime research firms showed that Iran has continued to ship large amounts of crude oil to China since the war broke out late last month.

Both sides appeared to increase pressure ahead of the high-stakes summit in Beijing. The U.S. launched trade investigations into a broad swath of countries over alleged excess capacity and failures to address forced labour.

In a statement Monday, China’s commerce ministry said the Trump administration had “once again abused the Section 301 investigation process to override domestic law over international rules,” calling the probes “extremely unilateral, arbitrary and discriminatory.”

Beijing said it had formally lodged representations with Washington against the investigations. “We urge the U.S. side to immediately correct its wrong practices and meet China halfway,” a ministry spokesperson said, calling for dialogue and negotiated solutions.

The ministry said it would monitor the progress of the investigations closely and take unspecified measures to defend China’s interests.

— CNBC’s Evelyn Cheng contributed to this report.

Countries around the world have scrambled to cope with the fallout of the energy shock from the Iran war, imposing measures from fuel export bans, loosening refining standards, and even getting workers to climb stairs instead of taking elevators.

This comes as the Iran war stretches into its third week, and despite U.S. President Donald Trump proclaiming that the U.S. has “won,” the effects of the war, especially on the energy market, continue to be felt.

On Thursday, China ordered refiners to stop refined fuel exports so as to mitigate potential domestic fuel shortages, according to Reuters.

Sources told the agency that the ban was issued by the National Development and Reform Commission, and includes shipments of gasoline, diesel and aviation fuel.

CNBC attempted to reach the NDRC for comment, but did not receive an immediate reply.

Other major countries are considering or have imposed price caps for fuel products.

On Monday, Japanese Prime Minister Sanae Takaichi said that Tokyo was considering steps ‌to cushion the economic blow from rising fuel costs, including curbing gasoline prices.

Takaichi was quoted by Japanese media on Thursday as saying she plans to cap pump prices at an average of 170 yen ($1.07) per liter nationwide, adding that gasoline prices could potentially hit 200 yen per liter.

Tokyo also conducted a unilateral release of crude from its own stockpiles, without waiting for coordination with other nations.

Japan has been particularly badly hit by the war in Iran, as the world’s third-largest economy needs to import almost all of its energy needs.

South Korean President Lee Jae Myung said on Friday the government implemented a petroleum price ceiling.

“We have decided to set a clear price cap on supply prices to curb domestic fuel prices, which are fluctuating wildly due to the unstable international situation,” Lee said.

India also had to make some tough choices. The country told oil refineries to prioritize supplying liquified petroleum gas to the 330 million households that use it as a primary cooking fuel, over 3 million businesses that use commercial LPG cylinders.

Work-from-home orders came back in some countries after years of companies trying to coax workers back to offices after the pandemic, with Vietnam and Thailand reportedly getting employees to work remotely.

Thailand went a step further, ordering civil servants to take the stairs instead of elevators, reducing their reliance on air conditioning and telling government employees to wear short-sleeved shirts rather than suits.

The Philippines and Pakistan both instituted four-day work weeks for government workers, and Bangladesh has even shifted its calendar, bringing forward its Eid-al-fitr holiday, allowing universities to close early in a bid to save fuel.

Tehran on Sunday vowed to kill Israeli Prime Minister Benjamin Netanyahu as the U.S.-Israel war on Iran continued to threaten oil supplies in the Gulf.

“IRGC vows to pursue and kill ‘child-killer’ Netanyahu if he is still alive,” Iran’s IRNA news agency said in a post on X, referring to the country’s Islamic Revolutionary Guard Corps.

Israel in return targeted key members of Iran’s leadership over the weekend.

The Israel Defense Forces said they had “eliminated” two senior Iranian intelligence officials of the “Khatam al-Anbiya” Emergency Command.

Late on Saturday, the IDF said in a post on X that it had struck the primary research center of the Iranian Space Agency and an aerial defense system production factory.

Iran continued to retaliate against targets around the region. Israeli emergency services reported a “recent missile barrage” fired at central Israel, but said there were no known injuries.

Meanwhile, oil-loading operations in the United Arab Emirates’ port of Fujairah resumed on Sunday according to media reports, after being interrupted a day earlier due to a fire caused by falling debris from an intercepted drone.

A spokesperson for Abu Dhabi’s state oil giant, ADNOC, which operates in Fujairah, directed CNBC to the Fujairah Media Office, which did not immediately respond to emailed requests for comment.

The ongoing war has effectively choked off energy supplies moving through the narrow Strait of Hormuz which separates Iran and the UAE.

On Friday, Brent crude oil futures closed above $100 per barrel for the second straight day, and the global oil benchmark has surged more than 40% since the war in Iran began.

U.S. President Donald Trump said on Friday that he directed the U.S. Central Command to carry out a bombing raid, hitting military targets on Iran’s Kharg Island for the first time. Trump threatened further strikes on Iran’s oil export hub, even as he repeatedly urged allies to deploy warships to help the U.S. secure the Strait of Hormuz.

Kharg Island has been thrust into the global spotlight because it is regarded as one of Iran’s most sensitive economic targets. The terminal accounts for around 90% of the country’s crude exports and has a loading capacity of roughly 7 million barrels per day.

Iran’s Foreign Minister Abbas Araghchi took to social media to say his country is “ready to form a committee with the countries of the region to investigate the targets that were attacked. Our attacks only target American bases and interests in the region.”

In a Telegram post Sunday, Araghchi said: “We have not targeted any civilian or residential areas in the countries of the region so far,” and added, “Occupying Kharg Island would be a bigger mistake than attacking it.”

The impact of the war is now also affecting major events in the Gulf region. Formula 1 said it has canceled the upcoming Grand Prix races in Bahrain and Saudi Arabia scheduled for April.

“While alternatives were considered, no substitutions will be made in April,” Formula 1 said in a post on X.