FX.co ★ German Bund Yield Rises on Oil Surge, ECB Rate Hike Bets

Germany’s 10-year Bund yield advanced toward 3.1%, its highest level since May 21, as climbing oil prices—driven by intensifying tensions in the Middle East—stoked inflation worries and bolstered expectations of further tightening by the ECB. Brent crude rose to a one-month high after the United States moved to block Iranian shipping through the Strait of Hormuz and continued strikes against Iran, heightening concerns over the reliability of global energy supplies.

The ECB, which raised interest rates in June for the first time in three years, is widely expected to tighten policy further. Markets are now pricing in two additional rate hikes by next spring, with a September move fully anticipated. Still, recent remarks from policymakers including Piero Cipollone and Martin Kocher point to a more cautious tone, as they report no clear evidence yet of second-round inflation effects. As a result, investors have largely discounted the possibility of a rate increase in July.