FX.co ★ Bund Yield Hits 2011 High as Oil Surges Ahead of ECB

Germany’s 10-year Bund yield climbed to 3.1%, its highest level since 2011, as oil prices surged on the back of the ongoing US blockade of Iran in the Strait of Hormuz, heightening inflation fears ahead of today’s European Central Bank meeting. Brent crude hit a new four-year high after reports that Washington is weighing additional military action against Iran. Although the ECB is expected to leave interest rates unchanged on Thursday, markets are now pricing in three quarter-point hikes in 2026, reflecting mounting inflationary pressures from the oil shock linked to the Iran conflict. Recent data from Europe’s largest economies showed inflation quickening in April, driven by sharply higher energy costs. This comes on the heels of the Federal Reserve’s decision to keep rates steady, even as its meeting exposed deepening internal divisions: four officials dissented—the most since October 1992—including three who opposed the Fed’s guidance that hinted at future rate cuts.