Euro Zone Yields Soar as Oil Prices Jump on Iran Conflict

The euro zone bond yields rose on Monday as oil prices climbed due to doubts about the US-Iran conflict resolution. Germany's 10-year yield reached its highest level since June 2009, up 2 basis points at 3.64%. The yield has seen seven consecutive weekly rises and is on track for a monthly increase of more than 31 bps.

The European Central Bank raised rates twice this year, and money markets are pricing in at least one further hike by year-end, with an expected 100 bps of tightening by October 2027. The rising energy prices and interest rate expectations have put pressure on government bonds globally.

Nomura's senior European economist Andrzej Szczepaniak expects a jump in headline inflation to 3.6% in September from 3.2% in August, citing higher vehicle fuel prices. He notes that core goods prices will indicate the extent to which producers are passing on costs to consumers.