FX.co ★ Bund Yields Surge Amid Middle East Tensions, Inflation Fears

Germany’s 10-year Bund yield climbed above 3%, approaching its highest level in 15 years, as the protracted conflict in the Middle East and rising oil prices stoked renewed inflation fears. While the United States asserted that Iran is keen to reach a deal and simultaneously deployed additional troops to the region, Tehran rejected the prospect of negotiations and demanded control over the Strait of Hormuz. Against this backdrop, investors now expect three ECB rate hikes by year-end, up from two previously, after ECB President Christine Lagarde signaled that policymakers stand ready to act “at any meeting” to counter inflation risks stemming from higher energy costs. At the same time, German consumer confidence slipped to its weakest level in two years heading into April, underscoring the economic fallout from the conflict.