London (AFP) - Global stocks slumped and oil prices rose Friday as talks between the United States and China failed to deliver progress on reopening the Strait of Hormuz, rekindling worries of persistent inflation pressures that could derail economic growth.

Oil prices rose three percent, with the international benchmark Brent crude contract at nearly $109 a barrel.

Rising crude futures also pushed up government bond yields, including in Britain, where Prime Minister Keir Starmer faced fresh threats to his leadership.

The yield on 30-year UK government bonds reached 5.869 percent, surpassing Tuesday’s mark to hit its highest level since 1998, as investors demanded higher returns to reflect growing inflation risks.

In Japan, the 30-year bond rate hit four percent for the first time since 1999.

“Bond yields have continued to march higher, and this has introduced more volatility to the wider financial markets as investors worry about the impact of increased government borrowings across the developed economies and what they mean for their economies,” said FOREX.com analyst Fawad Razaqzada.

On Wall Street, both the S&P 500 and Nasdaq Composite slumped from fresh all-time highs set Thursday as an AI tech rally rolled on.

The dollar firmed against the British pound, the euro and the yen.

The London, Paris and Frankfurt stock markets all ended the day with losses of more than 1.5 percent.

Investors were left disappointed as highly anticipated talks between US President Donald Trump and Chinese leader Xi Jinping failed to deliver major breakthroughs on the Middle East war or trade relations.

Trump did not spell out the trade agreements he said had been sealed with China, but told Fox News that Beijing had voiced interest in buying US oil and soybeans.

Trump also said he did not bring up the issue of tariffs during the summit.

China’s top diplomat later said the two countries had agreed to continue implementing “all” agreements previously reached and to establish councils for trade and investment.

“The meeting… was big on warm words and symbolism but not outcomes,” said Susannah Streeter, chief investment strategist at Wealth Club.

“With diplomatic efforts aimed at resolving the Middle East conflict in limbo, fresh uncertainty has flooded in,” she added.

The White House said the leaders had “agreed that the Strait of Hormuz must remain open to support the free flow of energy”.

But investors had hoped for more progress toward reopening the crucial strait, where oil tanker traffic has ground to a near standstill since the outbreak of the war, sending energy prices soaring.

Trump also told Fox News on Thursday that he was “not going to be much more patient” with Iran.

“Stalled US-Iran diplomacy keeps supply fears firmly in focus,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

“Even if resolved next month, the oil market could remain undersupplied through October, keeping inflationary pressures high and adding another headache for consumers, central banks, and, eventually, investors,” he added.

In Asia, Tokyo stocks closed two percent lower, while Hong Kong and Shanghai fell more than one percent.

- Key figures at around 1530 GMT -

Brent North Sea Crude: UP 3.0 percent at $108.88 a barrel

West Texas Intermediate: UP 3.5 percent at $104.71 a barrel

New York - DOW: DOWN 0.9 percent at 49,636.63 points

New York - S&P 500: DOWN 0.9 percent at 7,436.28

New York - Nasdaq Composite: DOWN 1.1 percent at 26,335.25

London - FTSE 100: DOWN 1.7 percent at 10,195.37 (close)

Paris - CAC 40: DOWN 1.6 percent at 7,952.55 (close)

Frankfurt - DAX 30: DOWN 2.1 percent at 23,950.57 (close)

Tokyo - Nikkei 225: DOWN 2.0 percent at 61,409.29 (close)

Hong Kong - Hang Seng Index: DOWN 1.6 percent at 25,962.73 (close)

Shanghai - Composite: DOWN 1.0 percent at 4,135.39 (close)

Pound/dollar: DOWN at $1.3324 from $1.3400

Euro/dollar: DOWN at 1.1624 from $1.1673 on Thursday

Dollar/yen: UP at 158.68 yen from 158.33 yen

Euro/pound: UP at 87.25 pence from 87.09 pence