Global markets have been turbulent since the first U.S. and Israeli strikes on Iran at the end of February, as soaring oil prices have weighed on equities and even so-called “safe haven” have been dragged into the volatility. Government bonds, which are often used to hedge portfolios against riskier assets like stocks, have been no exception. Bond yields and prices move in opposite directions. Developed-market government bonds are typically seen as stable investments that can hedge portfolios against volatility in equity markets — so yields typically fall if stocks decline sharply, as investors flock to safety. But in the initial aftermath of the U.S.-Israeli strikes on Iran, bond yields spiked as sovereign debt joined the sell-off gripping stock markets across the globe. Developed-market bonds have largely tracked equity sell-offs since the start of the war. Yields have suffered wild swings and diverged from movements typically seen among “safe” assets during a stock market downturn. By last Friday, trading of developed-market government bonds was muted after another volatile week. Oil prices eased slightly on Friday, but remained elevated as President Donald Trump said the U.S. has “unlimited ammunition, and plenty of time” to continue the war, and U.S. Defense Secretary Pete Hegseth brushed aside concerns about the blockade in the Strait of Hormuz. Global equities were mixed, with moves in European and U.S. stock markets far less turbulent than they have been in recent sessions. On Monday morning, oil prices were on the rise again after the Trump administration ramped up pressure on allies to help safeguard the Strait of Hormuz and investors react to threats facing Middle East export facilities. International benchmark Brent crude futures with May delivery traded 3% higher at $106.18 per barrel, while U.S. West Texas Intermediate futures with April delivery advanced 2% to reach $100.66. Five- and 10-year yields on Gilts — UK government bonds — were each 2 basis points lower at 4.8% and 4.3%, respectively. In a note on Thursday, Luke Hickmore, investment director for fixed income at Aberdeen Investments, said government bonds had “defied safe haven status” since the conflict began. This, he said, is because of the sharp rise in oil prices, which feed directly into transport costs, heating bills and the price of moving goods around the economy. “When oil prices rise sharply, inflation risks rise with them. Even if headline inflation had been easing before, higher energy costs put a floor under how far and how fast inflation can fall,” he added. “Bond investors care deeply about that. Bonds pay a fixed income. If inflation turns out higher than expected, those payments lose purchasing power.” If inflation turns out higher than expected, those payments lose purchasing power Investment director, fixed income at Aberdeen Investments Luke Hickmore Hickmore said investors were now demanding a higher return to compensate for the potential loss in purchasing power, which is why yields were largely on the rise — pushing bond prices lower alongside the equity sell-off. “In the past, geopolitical shocks often drove yields lower as investors rushed into government debt. This time is different,” he added. “The shock is coming through energy prices and inflation, not through a collapse in demand. When inflation is the problem, bonds do not provide shelter.” Wayne Nutland, Investment Manager at Shackleton Advisers, said that although various factors influence returns, bond and equity returns tend to be negatively correlated during periods of negative growth shocks — when economic growth falls below expectations, pushing bond prices up and often dampening equity valuations. “The ability of bonds to deliver positive returns during periods of economic weakness is why they are often referred to as ‘safe havens’, in addition to the lack of credit risk for government bonds,” he told CNBC in an email. But he noted that when higher inflation is a driver of market returns, bond and equity returns often move together. “Higher inflation concerns push up bond yields, [driving bond prices lower] and also impact negatively on equity returns via lower valuations and or fears over lower earnings,” Nutland said. “There’s little mystery to what is happening right now in markets: the sudden spike in the oil price following the military action in the Middle East is resulting in higher inflation forecasts, leading to bond and equity returns becoming more positively correlated.” ‘Hope is not a strategy’ Toni Meadows, head of investment at BRI Wealth Management, told CNBC that patterns being seen in the bond market reflected the fact that “so far the inflation worries are beating the growth worries.” “Equities are also recovering which tells you something about fear,” Meadows said. “Uncertainty doesn’t always drive investors to government bonds.” He said if economic growth was put under pressure by the war and higher energy prices, then monetary policy action could fuel demand for safe haven assets including bonds — but he noted that this trajectory was not guaranteed. “In this instance, a cessation of hostilities puts rate cuts on the table but that might be curtailed by lingering inflation if there is a risk premium in the oil price,” Meadows said. “So fear with inflation might curtail safe haven buying across the curve.” Lauren Hyslop, Fund Manager at Mattioli Woods, warned against making premature assumptions about how the conflict might evolve. She noted that yields had retreated sharply when oil prices fell earlier this week after Trump suggested the war could soon be over. “Traders rushed to reprice a swift central bank pivot,” she said, noting that the bond market, on Trump’s word, was “effectively betting on a clean, contained war.” “The problem? Every one of those assumptions remains deeply contestable,” she said. “Oil is elevated, the war’s duration is unknowable, and inflation risks haven’t evaporated, they’ve merely been temporarily ignored. As the old adage goes, hope is not a strategy.” — CNBC’s Bryn Bache contributed to this article.