Indian government bonds experienced a decline on Thursday as oil prices surged past $100 per barrel, driven by escalating tensions in the Strait of Hormuz, where Iran seized two ships. This strategic waterway is crucial, as it transits about 20% of global oil and liquefied natural gas supplies. The benchmark Brent crude closed at $103, marking its highest level in over two weeks. Consequently, India's benchmark bond yield for 2035 rose by 3 basis points to 6.9512%. Traders are concerned that rising oil prices could inflate India's import costs, which already account for a quarter of total imports. If the government is compelled to increase petrol and diesel prices, inflation could rise sharply in the coming months. The Reserve Bank of India has acknowledged rising oil prices as a supply shock, with Governor Sanjay Malhotra advocating a cautious approach. Additionally, the Indian rupee weakened past 94 against the dollar, and the Nifty 50 index fell by 0.5% to 24,254. In the U.S., Treasury yields also rose, further impacting the appeal of emerging market bonds.