LONDON/SINGAPORE – Markets were ​bracing for the European Central Bank's second rate hike of the year and key US inflation data on Thursday after the return ‌of $100-a-barrel oil due to escalating Middle East attacks, causing fresh angst on global bond markets.

There was respite of sorts in Europe as steadier oil and gas prices helped stem the bond selling that has pushed borrowing costs in many large economies to decades-long highs in recent weeks.

The region's stocks and the euro and sterling were all holding ​their ground too as traders moved into the traditional holding pattern ahead of the ECB's interest rate decision later in the day.

Columbia Threadneedle's ​global head of absolute return fixed income, Keith Patton, said with the ECB almost guaranteed to hike later, the key ⁠will be President Christine Lagarde's response to the inevitable questions about further increases ahead.

"Depending on the language she uses, the market is probably waiting for ​a more dovish, data dependent call," Patton said.

"The key question for me is have they done any modelling on what the detriment to growth will be ​if they did do another hike?"

Traders currently price ECB rates rising to 2.74 percent by December, implying almost two 25-basis-point hikes. But they are also pricing in an additional one by this time next year and roughly a 40 percent chance of a fourth move.

Germany's 10-year bond yield was hovering at 3.43 percent, after reaching 3.4389 percent on Wednesday, the highest ​since the heat of the euro zone crisis in April 2011.

France's OAT yield was at 4.335 percent after it had surged to a post-2008 high ​of 4.34 percent while the UK's 10-year and 20-year yields bobbed near respective post-2007 and 1998 highs of 5.26 percent and 5.87 percent.

Benchmark 10-year US Treasury yields meanwhile nudged up to 4.85 percent after an ‌eventful previous ⁠session that had seen Donald Trump promise to pay every US adult a $5,000 "Trump dividend" if his party wins November's congressional elections.

The Treasury Department had also announced a $6 billion buyback of longer-dated US bonds that disappointed some investors.

"Spending 4 percent of GDP to win an election", while the Treasury is buying bonds at the long end, "policy is not coherent", Columbia Threadneedle's Patton said.

Oil pressure

In the commodity markets, Brent crude futures edged up to $102 a barrel, having broken through the psychological $100 mark on Wednesday for the first time ​since July amid the re-escalation of the ​Iran war and as traders grappled with ⁠the prospect of yet more inflationary pressure.

"I think that Brent pushing through the $100 level will be seen by many in the market as a significant event in the current scheme of things," said Nick Twidale, chief market strategist at ATFX Global.

​Twidale said traders who had been holding off in hopes of a Middle East peace deal may now "hit the ​trigger as the realities ⁠of a longer conflict kick in."

Overnight, MSCI's broadest index of Asia shares fell 0.5 percent. Japan's Nikkei finished 0.2 percent higher while South Korea's KOSPI dipped 0.25 percent.

Wall Street futures rose 0.1 percent ahead of US inflation data later in the day that will set expectations for the Federal Reserve's meeting next week.

Investor attention will stay on the bond market. After ⁠the global ​selloff pushed 30-year yields to their highest level since 2007, Treasury Secretary Scott Bessent in August ​said that the government would increase buybacks of longer-dated bonds.

"Bessent has laid down the gauntlet to a group of sophisticated traders who don't like to be told what to do," said Matt ​Simpson, senior market analyst at StoneX.

"He may win a battle or two, but he'll only win the war if bond traders let him."