FX.co ★ German 10Y Yield Approaches Highest Since 2011

Germany’s 10-year Bund yield climbed above 2.9% on Monday, nearing its highest level since 2011 as oil prices surged past $100 a barrel amid growing concern that an expanding Middle East conflict could disrupt global energy supplies and stoke inflation. Major regional oil producers have cut output, while the Strait of Hormuz remains effectively closed, with no clear resolution to the conflict in sight. Since hostilities escalated last week, investors have been revising their inflation expectations upward, reinforcing bets that the European Central Bank may take a more restrictive policy stance. Several policymakers have also cautioned that a protracted war involving Iran and other countries could push eurozone inflation higher while simultaneously weighing on economic growth. Markets are now even pricing in the possibility of an ECB rate hike in July, followed by another increase in December.