FX.co ★ German Bond Yields Rise Amid Geopolitical Tensions and Inflation Fears

Germany’s 10-year Bund yield rose above 3% this week, gaining 2.5 basis points over the period and edging closer to the 15-year high of 3.13% reached in late March. The move came amid escalating tensions between the US and Iran, which further undermined an already fragile ceasefire. Borrowing costs tracked the rally in oil prices, reigniting inflation fears and strengthening expectations that the European Central Bank may adopt a more hawkish policy stance.

Market participants have adjusted their outlook accordingly: traders now expect at least two ECB rate hikes by the end of 2026, assigning around a 30% probability to a third increase. Meanwhile, Tehran has maintained an almost complete blockade of the Strait of Hormuz—resulting in what is being described as the most severe disruption to global energy supplies on record—while insisting that Lebanon be included in any peace negotiations. By contrast, US President Donald Trump has criticized Iran’s management of oil flows through the strait. Pakistan is scheduled to host talks between the two parties this Saturday.