Summary of "Man-made Volatility: What Happens When Markets Don’t Know What Will Come Next"

Author: Kathleen Brooks, Research Director UK

Date: 24 September 2026

Key Takeaways

• Commodity and bond market volatility is expected to remain high.
• The bond market is exerting pressure on the White House regarding the ongoing Middle East conflict.
• Current bond market volatility indicates potential for further increases in yields.
• The recent bond market sell-off is unusual given the absence of economic crises.
• Future developments in the Iran conflict may influence bond yields and oil prices.

Market Overview

As markets enter the US session, there is a notable lack of clear direction. Bond yields are fluctuating significantly, with Brent crude oil prices experiencing a spike to $106 per barrel before a subsequent drop of 3%. The uncertainty surrounding various geopolitical issues, including the Iran conflict and oil supply routes, contributes to this volatility.

Bond Market Pressures

The rise in global sovereign bond yields, with US 2-year yields increasing by 20 basis points this week, signals that the bond market is beginning to pressure the US government to address the Middle East war. The average global bond yield has reached nearly 4%, the highest since 2007, indicating a shift away from the era of low yields.

Understanding Bond Market Volatility

Current volatility in sovereign bond markets is attributed to rising debt levels, persistent economic growth, and inflation risks. These factors are causing yields to rise, suggesting that there is still room for further increases, particularly as fiscal policies in the US and UK remain expansionary.

Current Economic Context

Despite the volatility, developed economies are showing signs of growth, which justifies higher yields. The recent PMI data indicates expansion in many developed economies, including the US. However, the correlation between rising Treasury yields and a strengthening dollar suggests that the market is not anticipating a fiscal crisis.

Future Outlook

While a resolution in the Iran conflict could alleviate some pressure on bond yields, inflation risks are likely to keep yields elevated. The ongoing crisis in refined products, particularly diesel and petrol, continues to exert upward pressure on consumer prices, increasing the likelihood of further interest rate hikes.

Political Implications

The upcoming Trump/Xi summit may temporarily shift focus away from the Iran conflict, potentially impacting market volatility. Observers are keen to see if Trump will respond to bond market pressures in the coming days.

Conclusion

Overall, the article highlights the complex interplay between geopolitical events, economic indicators, and market reactions, emphasizing the need for investors to remain vigilant in a rapidly changing environment.