A surge in global bond yields, led by Japan’s 10-year yield touching 3% for the first time since 1996, may keep Indian markets under pressure as investors brace for tighter global liquidity, higher crude prices and fresh inflation risks. For India, the bigger issue is that bond yields are rising together across major markets at a time when crude oil is high, the Middle East conflict is dragging on and the US Federal Reserve is again sounding hawkish on inflation.Why Japan matters to IndiaAnalysts say Japan has long been one of the world's largest pools of savings. For years, low interest rates at home pushed Japanese money into overseas bonds and other global assets. When Japanese yields rise sharply, that equation may change.If investors can earn better returns in Japan, even a gradual reduction in Japanese demand can push up global bond yields. Higher global yields then make emerging markets such as India less attractive for foreign investors.Masahiko Loo, senior fixed income strategist at State Street Investment Management in Tokyo, said the move in Japan is more of a normalisation story than a crisis."A 10-year JGB yield at 3% is undoubtedly a milestone, but I would view it more as a normalisation story than a crisis story. Markets are repricing for a higher inflation regime, a higher neutral rate and growing confidence that the BOJ has further to go," Loo said."The other underappreciated factor is Japan. The story is not large-scale repatriation, but Japan gradually ceasing to be the marginal buyer of foreign bonds. Less incremental demand from one of the world's largest pools of savings is helping push term premium higher globally. This is why the selloff feels more like a buyers' strike than a sellers' panic," he said.When Japan, US and Europe yields rise together, global investors demand higher returns to hold risk assets. This can hit foreign flows into Indian equities and bonds, lift domestic bond yields, put pressure on the rupee and hurt valuation multiples in stocks.Also Read: Market close: Sensex, Nifty end lower as losses in banking, auto dragOil and Warsh add pressureThe global backdrop has turned more difficult because the Middle East conflict has kept oil prices high. Brent crude held near $91 a barrel, adding pressure on oil importers such as India. Higher crude can widen India’s import bill, hurt the rupee, raise inflation risks and squeeze margins for companies that use fuel or crude-linked raw materials.Tai Hui, APAC chief market strategist at JP Morgan, said the Middle East stalemate risks pushing energy prices higher as the world moves towards the winter season."The stalemate in the Middle East risks pushing energy prices higher as we approach Q4. A decline in inventory and seasonal demand for fuel going into winter in the northern hemisphere means the direct impact on headline inflation around the world is to the upside," Hui said.He added that US foreign policy steps, including sanctions against Iran’s trade partners and renewed tariff threats, could also trigger quick price increases.The US rate outlook has also turned less friendly. US 10-year Treasury yields topped 4.75% on Monday for the first time since January 2025 and rose further in Asian trade. According to CME FedWatch, the probability of a 25-basis-point Fed rate increase later this month has risen to 66%, from about 41% a week earlier.The repricing followed Federal Reserve Chair Kevin Warsh’s Jackson Hole remarks. Warsh said US inflation numbers were concerning and that the Fed could have more work to do if inflation does not move back towards the 2% target at sufficient speed.For India, this means the global liquidity cushion is weaker. A hawkish Fed, higher US yields and rising Japanese yields together can keep foreign investors cautious on emerging markets.India GDP stays healthyIndia is not entering this global volatility from a weak domestic position. Q1 GDP growth surprised positively at 7.8% year-on-year, showing broad-based strength in the economy. Growth has been helped by limited pass-through of higher crude prices to retail fuel prices, which has supported household purchasing power. GST cuts announced last year have also helped domestic demand.Indian government bonds already came under pressure at the start of the month. The yield on the benchmark 6.94% 2036 bond rose towards 7%, touching 6.96% in early trade on Tuesday, its highest level since June 8.Equities also reflected caution on Tuesday. Indian benchmark indices stayed under pressure through the session but managed to close above the key 24,000 mark on Nifty. Elevated crude oil prices, geopolitical worries and weekly expiry kept intraday trade choppy.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)