FX.co ★ German Bund Yield Rises as Iran Oil Crisis Fuels ECB Rate Hike Bets

Germany’s 10-year Bund yield rose to 2.99%, approaching its highest level since July 2011, as surging energy prices and the European Central Bank’s hawkish stance strengthened expectations for multiple rate hikes in 2026. Brent crude surpassed $110 per barrel following attacks on Middle Eastern refineries, amid reports that the Trump administration may target Iran’s Kharg Island, a key export hub. Markets are now pricing in at least two ECB rate increases this year, and possibly a third, after the central bank left rates unchanged but revised its inflation forecast higher and cut its growth outlook. Policymaker Joachim Nagel signaled a potential rate hike next month if inflationary pressures intensify, while Francois Villeroy de Galhau reiterated the ECB’s determination to act decisively in the face of mounting risks in the Middle East.