"The average government debt level for G7 countries has soared to more than 100% of GDP from only 20%. Total global debt rose last year at the fastest pace since the pandemic, hitting a record $348 trillion, or more than three times global GDP."
"Longer-term inflation expectations remain stable, but markets fear the Iran oil shock will trigger more spending on top of rapidly expanding deficits and debt, which is resulting in a higher term premium for bonds."
"Weak demand for recent Treasury bond auctions forced yields to go higher than expected, highlighting concerns among investors about the Iran war's impact on the deficit and debt."
The U.S. is particularly vulnerable due to unprecedented debt levels, which limit fiscal responses to energy shocks from geopolitical tensions. Historical oil crises have led to persistent budget deficits, with G7 countries' average debt exceeding 100% of GDP. Global debt reached a record $348 trillion, complicating government responses like price controls and subsidies. Investors are concerned about rising deficits, leading to higher bond yields. Central banks, including the Federal Reserve, struggle to manage inflation, which has remained above target for five years, impacting economic recovery prospects.
Read at Fortune
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