German 10-year Bund yields climbed to approximately 3.19-3.21% on July 23, marking their highest point since May 2011.
The catalyst this time around is a familiar one: oil. Brent crude prices have surged amid escalating tensions in the Middle East, particularly concerning Iran and the Strait of Hormuz, the narrow waterway through which roughly a fifth of the world’s oil supply passes. When energy prices spike, inflation expectations follow. And when inflation expectations follow, bond yields do what they always do: go up.
The ECB’s tightrope walk
The European Central Bank is set to convene for a policy decision on July 23-24, with investors widely expecting the central bank to hold rates steady for now.
Money markets have fully priced in at least two 25-basis-point rate hikes by December 2026. The most likely next move is a September increase, which would follow the ECB’s June 2026 hike, a decision that ended a three-year moratorium on rate increases.
