FX.co ★ Italy’s BTP Yield Hits 11-Month High

Yields on Italy’s 10-year BTPs rose to about 3.77%, extending their recent upward trend to the highest level since April 2025, as investors reassessed inflation risks stemming from the escalating conflict in the Middle East. The regional crisis has entered its second week with no resolution in sight, threatening global oil supplies, pushing up energy costs, and likely prolonging inflationary pressures across Europe. Oil prices have now climbed above $100 per barrel. In response, markets have increased their expectations that the European Central Bank will adopt a more restrictive monetary policy stance. Several policymakers warned last week that if the conflict in Iran persists and spreads, it could drive eurozone inflation higher while dampening economic growth. Market pricing now reflects expectations of two full 25 bps rate hikes by year-end, up from one a week earlier, with the first increase almost fully priced in by June.