German 10-year Bund yields held at 3.02%, edging lower as oil prices eased but remained close to multi‑year highs. Persistent Iran–US tensions and fears that a prolonged conflict could stoke inflation kept markets on edge. Iran claimed it had targeted a US command ship in the Gulf of Oman, while the Republican-controlled House voted to block US military action against Iran, a rare challenge to President Trump’s administration. Separately, Israel and Lebanon agreed to a conditional ceasefire, though Prime Minister Netanyahu cautioned that further strikes remained possible.
On the monetary policy front, markets are almost fully pricing in a 25-basis-point ECB rate hike at the June 11 meeting, with two—potentially three—increases expected over the course of the year. This follows a rise in Euro-area inflation to 3.2% in May, its highest level in more than two and a half years, driven largely by surging energy costs linked to the conflict. Core inflation climbed to 2.5%, while services inflation reached 3.5%, pointing to increasingly broad-based price pressures beyond energy.
