US borrowing costs hit highest level since 2007
US borrowing costs hit highest level since 2007. Image source, Getty ImagesByFrancisco VelasquezBusiness reporter, Reporting fromNew YorkPublished15 September 2026US government borrowing costs climbed to their highest level since 2007 after a jump in oil prices further fuelled concerns about inflation.
What happened
Image source, Maskot/Getty ImagesPublished2 March 2026Updated 14 September 2026Petrol and diesel prices have both hit the highest levels since 2022 as the conflict in the Middle East continues to impact drivers' finances. While the rise in borrowing costs has been "orderly" this year, rather than sudden, she said rates could remain elevated if geopolitical tensions and high energy prices remain "front and center". Government bond yields have been rising globally for months, driven by worries that inflation caused by the oil price surge since the start of the US-Israel war with Iran will lead to higher interest rates.
Higher interest rates and inflation tend to drive up the yields bond investors demand on government borrowing. Tech giants are borrowing massive piles of cash to build huge data centres. Crude oil is a key ingredient in petrol and diesel, which means that higher wholesale costs make filling up a car more expensive. Since the war began, the price of a barrel of Brent crude – the global benchmark for wholesale oil prices – has been very volatile.
The wider picture
RAC has said there is "a very strong case" for leaving fuel duty at its current level, at least until the end of the Parliament. Even if a deal is agreed to reopen the strait, experts warn it will take time before normal levels of shipping through the Strait of Hormuz resume, and the impact of the war will continue to affect the global economy for potentially months to come. The 10-year Treasury yield briefly topped 5% Monday and rose to 5. 04% on Tuesday before easing back.
The effective interest rate on US government bonds over 10 years, known as the 10-year Treasury yield, rose as high as 5. The US has been buying back bonds back in a bid to drive the Treasury yield down, with Treasury Secretary Scott Bessent calling the intervention "successful". The global benchmark wholesale oil price rose to over $109 a barrel on Tuesday, up from around $86 at the end of August, after renewed concerns about Saudi Arabia's ability to export oil following rising tensions in the region.
Investors are anticipating the US Federal Reserve Chair Kevin Warsh will raise interest rates to combat the inflation caused by higher oil prices. However, US President Donald Trump opposes a rate hike, having long argued lower rates are great for boosting the economy.
What has been reported
He fell out with Warsh's predecessor Jerome Powell over his decision not to cut rates. Bond yields can also be a sign of how much faith investors have in a given government, with a higher yield reflecting less confidence. Competition for debt from artificial intelligence (AI) firms is also driving up yields. This raises interest rates on tech firm's debt which increases government bond yields in response. Carol Schleif, chief market strategist at BMO Wealth Management, said bond markets had been signalling for weeks that higher interest rates may be needed.
Related topicsInflationUS economyUnited StatesMore on this storySatellite image reveals major damage that shut crucial Saudi oil pipelinePublished13 hours agoFaisal Islam: Why bond market wildfire is keeping world leaders up at nightPublished2 September The average price of a litre of petrol now stands at 169. 68p, according to the RAC motoring body, while diesel has risen to 191.
What happens next
The cost of filling up a vehicle is back to where it was after Russia launched a full-scale invasion of Ukraine more than four years ago. The US-Israel war with Iran has severely disrupted the production and transportation of oil across the region. Motor fuel prices fell back when the US and Iran agreed in June to a framework deal to end the fighting but have started rising again as tensions resurface. With the price of wholesale oil back above $100 a barrel, Simon Williams, head of policy at motoring organisation RAC, said "there's no end in sight to high pump prices" for drivers.
How do wholesale oil prices affect the cost of petrol and diesel at the pump? The price of petrol and diesel is also heavily influenced by demand and refining capacity. 44) per barrel increase in the oil price pushes up pump prices by roughly 7p a litre.
The report has been compiled by The Daily Waves using information reported across bbc.co.uk. Details are presented according to the information available at the time of publication and may change as authorities, organisers or other relevant parties provide updates.