Euro zone government bonds sold off sharply on Monday, pushing yields to their highest in a year as fears of a prolonged fallout from the widening war in the Middle East boosted oil prices and aggravated inflation concerns. Germany's 10-year government bond yield , the bloc's benchmark, rose 5.9 basis points to 2.922%, its highest in a year. Get a daily digest of breaking business news straight to your inbox with the Reuters Business newsletter. Sign up here. The yield on the interest rate-sensitive two-year bond rose 15.1 bps to 2.459%, a level last seen in August 2024. Advertisement · Scroll to continue
The U.S.-Israel war with Iran has stoked fears of a supply shock as oil shipments from the Strait of Hormuz, a crucial shipping route, lifted crude prices to their highest since 2022. On Monday, Iran named Mojtaba Khamenei to succeed his father Ali Khamenei as supreme leader, defying U.S. President Donald Trump and signalling that hardliners remain firmly in charge in Tehran. While fears of a drawn-out conflict are weighing on global risk assets, bonds have not benefited from safe haven demand. Investors worry that higher crude prices could complicate the rate outlook for central banks and revive the risk of policy tightening, dragging down bond prices, which move inversely to yields.
