Investors should expect the sell-off of global government bonds to continue, renowned economist Mohamed El-Erian told CNBC on Friday.

“I don’t see any appetite in the U.S. for immediate fiscal consolidation. So I suspect we will continue to see upward pressures on yields,” he told CNBC’s Carolin Roth at the Ambrosetti Forum in Cernobbio, Italy.

Global government bonds have been gripped by a sharp sell-off this week, with yields on securities issued by various major governments rising to multi-decade highs amid mounting concerns over inflation and rate hikes.

Bond yields and prices move inversely to one another.

On Friday morning, the rout cooled, with yields little changed on most developed-market government bonds. U.S. Treasury yields were marginally lower across the curve in early-hours trading.

El-Erian, the Rene M. Kern Practice Professor at the University of Pennsylvania’s Wharton School and chief economic adviser at Allianz, told CNBC he did not see anything wrong with how the markets were functioning – but added that “reliable buyers and holders” of U.S. Treasurys were coming under pressure.

“China, for geopolitical purposes, is no longer as willing,” he said. “Japan and the Gulf countries have domestic issues.”

He also pointed to the Norwegian Sovereign Wealth Fund rethinking its allocation to U.S. government bonds.

“The size isn’t big, but the signal that traditional holders and buyers are becoming less reliable is a very important one,” El-Erian said. “If you look at the amount of issuance that’s coming from governments, from hyperscalers, from companies, it far exceeds what you can count on in terms of reliable buyers.

“And that’s why there’s been pressure on interest rates. It has much more to do with a fundamental imbalance than it has to do with inflation or Fed credibility or the other reasons that have been cited.”

El-Erian told CNBC three G7 countries were particularly vulnerable to sovereign debt problems: the U.K., Japan and France.

“Those by numbers, by everything else, and the U.K. in particular is what I call a high-beta country,” he said. “That every time rates move by a bit in the U.S., they move by a lot more in the U.K.”

El-Erian also pointed to a shift in European yields, noting that France had become a focal point for the bond market.

“In the old days you would worry about Italy. Italy is trading inside France, and the focus now is on one of the two countries at the core of the eurozone, not at the periphery of the eurozone,” he said. “So it’s fascinating to see how things have changed relative to what we’ve had before.”

U.S. Treasury department’s ‘step too far’

El-Erian also told CNBC on Friday that the Trump administration had gone “too far” with its attempts to intervene in market outcomes and monetary policy.

Last month, the U.S. Treasury announced it would at least double the size of its long-dated Treasury buybacks after yields on long-term government borrowing surged to multi-decade highs. On Thursday, U.S. Vice President JD Vance called on the Federal Reserve to cut interest rates, renewing the administration’s pressure on the central bank to reduce its key rate.

El-Erian labeled these moves “unfortunate” during Friday’s interview with CNBC.

“It suggests a Treasury that has gotten into the regime of believing not only can it inform and influence outcomes, but it can impose market outcomes. I think that’s a step too far,” he said. “And the question now is, how do you step back from this? I think the results are clear. It’s a massive market. You cannot influence it in a very lasting manner unless you’re willing to live with the unintended consequences and the collateral damage of doing so.”

CNBC reached out to the U.S. Treasury Department for comment.

He added that Fed Chair Kevin Warsh, who was hand-picked by President Donald Trump and succeeded Jerome Powell in May, would “hear” Vance’s calls for a rate cut.

“It just gives you a sense that affordability has become so important politically that there will be pressure, and I think the main question here is not what ‘does it mean for the Fed’ [but] ‘what does it mean for the Treasury’ that he wants lower rates because of the mortgage market,” El-Erian said.

Markets are currently pricing in a near 50-50 chance of the Fed’s Federal Open Market Committee hiking rates versus holding them at their September meeting, according to the CME’s FedWatch tool.

Warsh gets ‘three things right’ at Jackson Hole

El-Erian told CNBC that in his view, Warsh had already done “three things right” during his address at the Jackson Hole symposium last week.

“First, he addressed the concerns about his reaction function,” he said. “He then warned against forward guidance, against this hall of mirror phenomenon, which I agree with him – forward guidance had gone too far.”

“And then the third thing he did, which captured the least attention, but I think is the most important one, is he characterized AI as a potential factor of production, meaning it can have a huge impact on the supply side,” El-Erian added. “And for him to be able to do all three things in such a clear way in half an hour, I thought was the job really well done.”

The European Union has officially signed onto the U.S.-led sanctions drive targeting Iran, even as South Korea indicated it is evaluating a potential military contribution to help reopen the Strait of Hormuz, with Washington urging allies to support its conflict with Tehran across both economic and military dimensions.

U.S. Treasury Secretary Scott Bessent commended the EU for joining ‘Operation Economic Outcast,’ the initiative designed to cut Tehran off from the international financial network.

“We value their firm and prompt position,” Bessent wrote in a Thursday evening social media post. “The international community is delivering an unambiguous signal to the Iranian government: We will not relent until every last financial lifeline has been cut,” he continued.

The remarks followed an Aug. 31 statement from Brussels expressing backing for efforts to halt Tehran’s ‘destabilizing activities’ and restart peace negotiations, including via Operation Economic Outcast, to impose further economic strain on the Islamic government.

The bloc’s approval coincided with this week’s gathering of Group of 20 finance ministers and central bank governors in Asheville, North Carolina.

“The United States remains steadfast alongside our allies in preventing the lethal Iranian regime from leveraging the global financial system to finance its nuclear aspirations, weapons development, and proxy terror networks,” Bessent stated in the Thursday post.

The Trump administration initiated the Operation Economic Outcast campaign in late August, taking aim at Iran’s access to digital assets, advanced technology acquisition, gold holdings, commercial aviation, and maritime shipping.

Iran’s Foreign Ministry spokesperson, Esmail Baghaei, countered the EU’s decision to endorse what he labeled Washington’s ‘economic terrorism.’ In a Sept. 1 post, Baghaei accused the bloc of having ‘surrendered its sovereignty, its laws and regulations, values and ethics to U.S. coercion.’

Bessent characterized the campaign as an ‘economic onslaught’ on Iran’s worldwide financial ties, cautioning that nations assisting Tehran should ‘anticipate sharing in the isolation of a decaying regime.’ China stood as Iran’s top trading partner, purchasing approximately 90% of Iran’s sanctioned crude oil exports prior to the conflict.

The EU separately upholds its own sanctions framework aimed at Iran’s nuclear and ballistic missile programs as well as its military assistance to Russia.

Ahead of the summit, Bessent had indicated he would urge G20 counterparts to sever financial links with Tehran or confront secondary sanctions. He also signaled weekly new secondary sanctions, initially targeting banks, with a warning to completely disconnect institutions facilitating Iran-linked transactions from the dollar-based financial system.

Seoul Considers Role in Hormuz

Separately, South Korea is evaluating options that include military aid to back the U.S. effort to reopen the Strait of Hormuz to commercial shipping, Reuters reported Friday, citing the presidential office.

The government, however, refuted local media reports that a decision had already been reached, stating ‘details related to the issue have yet to be decided,’ in a statement to reporters, per Yonhap News.

Multiple South Korean media outlets reported Thursday that Seoul was readying to deploy troops to the Gulf region before year-end, and might request parliamentary approval as early as this month.

The deliberation comes as Washington has voiced frustration with Seoul’s hesitance to provide military support in its war against Iran, including by reducing an annual joint military exercise last month and canceling a landing drill planned for September.

Impasse

Military clashes in the region escalated in recent days, rekindling concerns of a wider conflict.

The U.S. military executed a fresh round of strikes earlier this week, targeting military sites in Iran in response to attacks on vessels and American forces in the area. Iran has answered back, firing missiles at U.S. military installations throughout the Middle East.

Shipping through the Strait of Hormuz — a chokepoint for about one-fifth of global oil flows prior to the war — stayed muted, with Iran conducting intermittent strikes on ships using the southern shipping lane off the Omani coast.

The U.S. has kept a naval blockade in the strait, preventing vessels from entering or departing Iranian ports to hinder the country’s crude oil exports. U.S. Central Command stated Friday that it has diverted 87 commercial vessels, disabled three, and boarded two to guarantee full compliance.

There is still an opportunity to grab attractive dividend-paying energy names, despite the sector’s run higher this year, according to Goldman Sachs. While the firm continues to see long-term value in the oil and gas sector, it recognizes the area is outperforming the broader market right now. The State Street Energy Select Sector SPDR ETF (XLE) has gained 45% so far this year and hit a 52-week high on Thursday. In comparison, the S & P 500 is up 13% year to date. XLE YTD mountain State Street Energy Select Sector SPDR ETF year to date Energy companies have benefited from the jump in oil prices due to the conflict in the Middle East. Brent crude futures closed above $95 per barrel . “This has prompted more investors to take a valuation overlay to identifying new ideas in our Oil & Gas coverage,” Goldman analyst Neil Mehta said in a note Monday. “For those screening for value, we screen our comparison sheets and identify Buy-rated stocks that currently offer above-average total return while trading at below-average 2028 multiples as investors position into year-end.” Here are some of the names that made the cut: Devon Energy has gained roughly 33% so far this year, versus a 40% advance for its large-cap oil exploration and production peers, said Mehta, calling the name “a compelling valuation opportunity.” “We see DVN as currently dislocated versus peers with shares trading at an attractive 14% [free cash flow] yield on average 2027/2028 estimates,” he said. He also has a constructive view on Devon Energy’s development and focus on the Delaware Basin asset as the core of its long-term portfolio. Plus, the company seeks to return up to 70% of its free cash flow to shareholders, he added. Last month, Devon Energy handily beat earnings and revenue expectations for its second quarter. It announced a dividend hike in May. Mehta’s $55 price target implies 12% upside from Wednesday’s close. The stock pays a 2.3% dividend yield. Gas exploration and production name, Expand Energy , also has a compelling valuation relative to its Appalachian peers, according to Mehta. He sees it currently trading at a 10% free-cash-flow yield on his average 2027/2028 estimates relative to its peer average of 8%. Expand Energy, which yields 2.3%, has reliable free cash flow and a steady capital return program, Mehta said. In addition, he believes in its ability to “generate sustainable cash flow improvement through incremental marketing and commercial initiative.” The company posted mixed second-quarter results in July, with its adjusted earnings per share topping expectations and its revenue falling short. Shares are down roughly 10% so far in 2026. U.S. refiner HF Sinclair , on the other hand, has rallied 131% year to date — and also hit a 52-week high on Thursday. Despite that, Mehta believes the stock trades at a discount to its refiner peers due to uncertainty around the CEO and chief financial officer transitions. Both are currently interim roles. ”[W]e continue to see value in the company’s non-refining earnings contributions (Lubricants, Renewable Diesel, and Midstream) in addition to the company’s leverage to niche refining markets (West Coast/Rockies and Mid-Continent),” Mehta wrote. HF Sinclair posted a beat on both its top and bottom lines for the second quarter and raised its quarterly dividend. The stock currently yields about 2%. Mehta’s $114 price target suggests 7.5% upside from Wednesday’s close. Lastly, oil major ConocoPhillips has a $146 price target, which implies more than 6% upside ahead. Goldman’s buy rating is based on a $7 billion free-cash-flow inflection by 2029 as four major growth projects come online and the company cuts $1 billion in costs. The stock is trading at a discounted multiple, which reflects “a heavy phase of the capital cycle, with the market hesitant to pay for a back-half-weighted free cash flow inflection, where the bulk of the uplift lands in 2029,” Mehta wrote. ConocoPhillips has gained 45% year to date, hitting a 52-week high on Thursday. It currently yields 2.5%.

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