Germany’s 10-year Bund yield hovered around 3.12% on Thursday, down more than 8 basis points for the week, as growing optimism over a potential diplomatic breakthrough in the Middle East lifted expectations of lower oil prices and eased pressure on central banks to tighten policy further.
Iran announced it had reached an agreement with Oman on a proposed shipping route through the Strait of Hormuz, raising hopes for a resumption of energy flows, even though a broader US–Iran accord remains uncertain. President Donald Trump said talks were continuing and that he would “see what happens.”
The prospect of lower energy prices has reinforced expectations that the European Central Bank will stick to a gradual pace of policy tightening. Markets are currently pricing in one additional rate increase by year-end, with only a modest likelihood of a second move.
At the same time, German factory orders rose more than expected in June, adding to signs that Europe’s largest economy may finally be gaining momentum.