Global bonds tumble as flaring inflation spooks investors

* Bond market selloff gathers pace

* US Treasury yields at one-year highs

* Euro zone bond yields rise, JGB yields hit record peaks

By Amanda Cooper

LONDON, May 15 (Reuters) - The global bond market limped to the end of a bruising week on Friday, as growing evidence of economic damage from the Iran war prompts investors to assume interest rates will rise faster than expected and growth will suffer.

U.S. Treasury yields hit their highest since in around a year as traders anticipate the Federal Reserve may need to hike rates to rein in inflationary pressures stemming from Iran war-fuelled energy shocks. German, Italian and French bonds came under fire in early European trading, while Japanese bond yields hit record highs.

Italian 10-year yields surged almost 9 basis points (bps) to around 3.87%, bringing the rise for the week to nearly 14 bps, while benchmark German Bund yields rose almost 6 bps to around 3.11%.

Inflation data this week has shown consumers and businesses are starting to see big increases in price pressures as a result of the war, which has pushed up the price of crude by over 50%.

Two-year yields, which are the most sensitive to changes in expectations for inflation and interest rates, have risen most sharply this week, but yields on longer-dated bonds have started to increase as well, reflecting investors' concern about the longer-running impact from a price shock.

"It's not just inflation, but also higher deficits that should be the focus," Jefferies strategist Mohit Kumar said.

"We are likely to see a number of support measures for fuel subsidies announced in the coming months."

Kumar said he anticipated a steepening bias in government bond curves, referring to a market dynamic in which longer-dated bond yields rise more quickly than those for shorter maturities. Benchmark 10-year Treasury notes US10YT=RR were last yielding 4.53%, up 7.3 bps on the day and around their highest since last June. In the UK, gilt yields have been on a rollercoaster ride this week, hitting their highest in decades, as pressure mounts on Prime Minister Keir Starmer to resign over his Labour party's hefty losses in local elections and potential challengers to his leadership emerge.

(Reporting by Amanda Cooper; Editing by Dhara Ranasinghe)