This past week saw global sovereign debt markets absolutely dump. Here’s how it might get a lot worse.

Friday saw global sovereign debt markets in free fall. Yields spiked across the board- not because of some sudden inflation panic, but because of a much deeper, more structural force at work.

The trigger?

The Strait of Hormuz is effectively shut down.That narrow waterway carries about 20% of the global oil supply(and a third of global seaborne oil). With it throttled, oil prices have shot higher, slamming net oil importers in EU, Asia, and the UK with a brutal terms-of-trade shock.

For countries like the UK and France, their trade deficit is the primary driver of their current account…

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