FX.co ★ German Yields Remain Below 2.5% as Middle East Tensions Escalate

The yield on Germany's 10-year Bund has dipped below 2.5%, reaching its lowest point since May 7. This development comes as investors gravitate towards safe-haven assets in response to heightened tensions in the Middle East, which have exacerbated fears of a wider regional conflict. In a significant military action, Israel conducted strikes on Iran during the night, specifically targeting nuclear facilities and high-ranking officials, stating the move was crucial to address an existential threat. In retaliation, Iran launched hundreds of drones and cautioned of further reprisals. Concurrently, market anxiety has been exacerbated by the resurgence of trade war worries, following US President Donald Trump's announcement of forthcoming communications to major trading partners. These letters will detail new unilateral tariff plans. Meanwhile, on the monetary policy landscape, recent statements by European Central Bank officials have strengthened the belief that the ECB might consider halting its current easing measures. They seem poised to adopt a cautious approach to evaluate the economic ramifications of potential new US tariffs.