BTP Yield Hits Highest Since '23 Amid Strait of Hormuz Uncertainty

Italy's 10-year BTP yield has reached its highest level since October 2023, exceeding 4.55%. This spike is attributed to uncertainty surrounding the Strait of Hormuz, which has driven up oil prices and raised concerns over inflationary pressures.

The European Central Bank (ECB) now expects around 100 basis points of rate hikes by late 2027 due to projected eurozone inflation reaching its highest level in three years. The Italian government's budget deficit was confirmed at 3.1% of GDP in 2025, still above the EU's 3% ceiling.

The recent measures implemented by the government, such as lowering fuel taxes and introducing a diesel tax cut, are expected to provide some relief amid limited fiscal headroom ahead of next year's general election.