13.07.202607:17:13UTC+00Bund Yields Rise as Middle East Tensions Drive Inflation Fears

Germany’s 10-year Bund yield rose to 3.05% as oil prices jumped following a new round of US strikes on Iran, amid an escalating standoff over the Strait of Hormuz. US Central Command said it had hit dozens of targets in an effort to curb Iran’s capacity to threaten shipping, while Tehran announced the strait would remain closed "until further notice." The heightened uncertainty has reinforced inflation fears, leading investors to step up wagers on further European Central Bank interest rate increases.

The ECB, which raised rates in June for the first time since 2023, is now expected to deliver two additional hikes over the next year, with the first likely in September, as it seeks to counter inflation pressures stemming from higher fuel costs linked to the Iran conflict. ECB policymaker Yannis Stournaras warned on Friday that the central bank is "back to square one" in its battle against elevated inflation in the euro area.