(Yicai) March 3 -- Chinese government bond futures have rebounded following the escalation in Middle Eastern tensions. However, analysts warned that in the longer run, the bond market may face pressure amid rising oil prices and inflation.

The main 30-year and 10-year Chinese government bond contracts yesterday closed up 0.55 percent at CNY112.74 (USD16.37) and 0.13 percent at CNY108.53, respectively. Meanwhile, the five-year and two-year ones rose 0.09 percent and 0.02 percent to CNY106.08 and CNY102.464, respectively.

In the short term, rising risk aversion is beneficial for the bond market, Qiu Yuanhang, a fixed income, currencies, and commodities analyst at Citic Securities, told Yicai. Based on yesterday's market performance, the yields on most government bonds declined, indicating stable sentiment, he added.

The worsening situation in the Middle East may lead to a decline in global risk appetite in the short term, resulting in a flow of funds into safe-haven assets, such as bonds, which would drive interest rates down, said Yang Yewei, chief fixed income analyst at Guosheng Securities.

"Geopolitical conflicts impact bonds," said Liang Weichao, fixed income analyst at China Post Securities. "In the short term, they affect risk appetite and asset pricing."

"Looking ahead, it is necessary to pay attention to changes in the situation, especially regarding the impact on oil prices, which may affect inflation and, in turn, influence the Federal Reserve's monetary policy," Qiu pointed out. "This could also impose certain constraints on domestic monetary easing."

Oil supply shocks could drive global inflation, intensifying the upward pressure on interest rates, Yang predicted.

However, based on historical experience, the Chinese bond market is mainly influenced by internal factors, so the specific effects of changes in the international environment need to be observed with care, according to industry experts.

Editor: Futura Costaglione