Conflict-Driven Inflation Surge Drives Global Interest Rates Higher

The ongoing conflict in the Middle East has led to disruptions in energy markets, driving up inflation expectations and pushing bond yields higher.

In the Eurozone, heightened inflation risks and robust economic growth point to another ECB rate hike, with rates potentially reaching 2.5% by September.

Similarly, in the US, inflationary pressures remain high, particularly in the services sector, leading experts to expect a Fed rate increase in September, followed by another hike in the first quarter of 2027.

The resulting upward shift in yield levels has led to significant increases in German and US government bond yields, which are now at their highest since the start of the Persian Gulf crisis.