FX.co ★ German Yields Climb as Middle East Tensions Fuel Inflation Fears

Germany’s 10-year Bund yield climbed to 3.06%, approaching the 15-year high of 3.13% reached in late March, as expectations for a swift resolution to the Middle East conflict dimmed. The breakdown of US-Iran talks—prompted by Tehran’s refusal to abandon its nuclear program and its rejection of what it described as “excessive” US demands—sent oil prices sharply higher. Heightening tensions further, US President Donald Trump threatened to blockade the Strait of Hormuz, a critical chokepoint for global oil shipments, driving Brent crude up to $102 per barrel. The ensuing inflationary pressures have led markets to anticipate a more hawkish stance from the European Central Bank, with traders now pricing in at least two interest rate increases by the end of 2026.