European Bond Yields Rise as ECB Hike Expectations Grow

European bond yields ticked up on Monday, snapping a two-day rally as investors priced in an expected interest rate hike by the European Central Bank (ECB) at its upcoming meeting.

The ECB's hawkish policy stance has kept benchmark borrowing costs near multi-year highs, with German 10-year Bund yields hovering around 3.36% and Italian two-year yields remaining firm.

Market sentiment turned defensive after Iran announced plans to declare a restricted zone outside the Strait of Hormuz in the coming days, reigniting cost-push inflation fears across European manufacturing and transport sectors.

The threat of shipping restrictions along the key oil transit route pushed crude oil benchmarks up another 0.2%, extending a nearly 10% weekly rally that took Brent crude past $90 a barrel.