US-Iran Standoff Continues as Oil Prices Edge Up

The standoff between the United States and Iran over the Strait of Hormuz continued on Friday, August 14, with no progress in ceasefire talks. US President Donald Trump said the US has 'full control' over the waterway, but Iran rejected this claim, saying it remains under Tehran's control.

Iran is demanding the lifting of economic sanctions and the release of frozen assets before allowing the Strait to reopen. Despite the impasse, oil prices posted only a moderate increase, rising around 5% for the week after falling for two consecutive weeks previously.

The yield on 10-year German government bonds rose less than 1 basis point to 3.147%, and was little changed over the week. The yield on two-year German government bonds, sensitive to expectations for European Central Bank interest rates, was also little changed at 2.764%.

Commerzbank's Head of Interest Rate Strategy, Christoph Rieger, said rate-hike expectations may ease and Bund yields will test the lower end of their range due to subdued US inflation data and relatively low US retail sales figures.