FX.co ★ Italy’s Bond Yields Climb on Friday, Yet Post Weekly Decline

Italy’s 10-year BTP yield inched up to 3.8% at the close of a volatile week, but remained on track for a weekly decline of 5 basis points, largely reflecting Wednesday’s sharp 27-basis-point drop. Even with this pullback, borrowing costs across Europe stay elevated as rising US–Iran tensions threaten an already fragile ceasefire.

The latest escalation has driven oil prices higher, stoking renewed inflation concerns and bolstering expectations of a more hawkish European Central Bank. Market pricing now reflects at least two ECB rate hikes by the end of 2026, with roughly a 30% probability assigned to a third increase.

In the geopolitical backdrop, Iran has sustained its near-total blockade of the Strait of Hormuz while pressing for Lebanon’s participation in peace talks. At the same time, US President Donald Trump has criticized Tehran’s handling of oil shipments through the strategically vital corridor. Pakistan is set to host negotiations between the two parties this Saturday.