Rising geopolitical tensions linked to the Iran conflict have reignited concerns across global bond markets, pushing U.S. Treasury yields higher and complicating the outlook for inflation and interest rates. However, U.S. Treasury Secretary Scott Bessent has downplayed fears of a prolonged inflationary spiral, describing the recent surge in energy prices and bond yields as temporary in nature.According to a Reuters report, Bessent said he believes the current spike in inflation expectations is largely tied to the disruption in energy markets caused by the conflict and is unlikely to create lasting pressure on the broader economy. He indicated that inflation should moderate once the geopolitical situation stabilises and energy supply routes return to normal operations.The remarks come at a time when global investors are reassessing expectations for interest rate cuts from major central banks. Rising oil prices and elevated Treasury yields have raised concerns that policymakers may be forced to keep monetary policy tighter for longer to contain inflationary risks.Bessent observed a more cautious tone among central bankers attending the recent G7 finance leaders’ meeting in Paris, as per the report. Several policymakers reportedly expressed worries about inflationary pressures and volatility in bond markets, particularly if the conflict-driven rise in energy prices persists.Benchmark U.S. Treasury yields have climbed sharply in recent sessions, reflecting growing uncertainty over the inflation outlook. The 10-year Treasury yield moved close to levels last seen in early 2025, while the 30-year bond yield hovered near highs not witnessed since 2007. Higher yields generally indicate investors are demanding greater compensation for inflation and fiscal risks.Despite the market turbulence, Bessent suggested that energy traders themselves appear to expect the disruption to ease over time. He pointed to the pricing pattern in Brent crude futures, where near-term contracts remained elevated while prices for later deliveries traded significantly lower, signalling expectations of eventual normalisation in oil markets.The recent rise in crude oil prices has intensified concerns that headline inflation could temporarily accelerate in major economies. However, Bessent indicated that he does not expect sustained spillover effects into core inflation, which excludes volatile food and energy prices and is closely monitored by central banks.The evolving geopolitical situation remains a major focus for investors globally, with markets closely watching energy supply routes, inflation trends, and signals from central banks regarding the future path of interest rates.