G7 finance ministers meet as Iran conflict rattles markets

The Iran war is triggering widespread economic disruption across the G7 nations, with finance ministers gathering in Paris on Monday to coordinate responses as bond yields surge and oil prices remain elevated. Eurogroup President Kyriakos Pierrakakis warned that while the European economy has shown resilience, the global economy will face mounting pressure even if the conflict resolves swiftly. The Strait of Hormuz, a critical chokepoint for oil and gas shipments, remains closed, causing Brent crude futures to climb 3% to $109.26 per barrel on Friday and U.S. West Texas Intermediate to settle above $105 per barrel. The International Energy Agency has cautioned that global oil inventories are depleting at record rates and could reach critical levels if the waterway does not reopen. Long-term borrowing costs across major economies have climbed sharply as investors price in inflation risks linked to tight energy supplies. The U.S. 30-year Treasury yield jumped nearly 11 basis points to 5.121% on Friday, its highest since May 2025, while U.K. 30-year gilt yields are trading at levels not seen since the late 1990s. Japan, highly dependent on energy imports, has also experienced sharp increases in bond yields. The surge in yields reflects shaken confidence in government debt issuers as the conflict chokes off Middle Eastern oil and gas shipments through the strategically vital strait. The economic fallout is forcing British businesses to scale back investment and hiring plans, with surveys showing companies prioritizing cost management over growth. More than half of medium-sized businesses surveyed by accountancy firm BDO cited higher energy and fuel costs combined with supply chain pressures as their biggest challenges. The Recruitment and Employment Confederation reported U.K. job vacancies fell 7.7% in April compared with March, with hiring particularly impacted in sectors such as aviation and travel. Chancellor Rachel Reeves is traveling to the G7 meetings to coordinate international action, with the government expected to announce additional support for households and businesses. Despite a surprise 0.3% GDP growth in March, economists remain pessimistic about the outlook for the rest of the year, noting that some of the early-year activity may reflect businesses and consumers stockpiling goods and fuel ahead of anticipated shortages.