Investing.com — declined on Thursday but stayed near its recent multi-year high as rising energy prices reinforced expectations for increased inflation and European Central Bank interest rate increases.
The benchmark 10-year yield for the euro zone was last down 5 basis points at 3.04%, after climbing more than 40 basis points since the conflict began. The yield remained close to the 3.133% level reached at the end of April, marking the highest point since mid-2011.
Following a meeting between U.S. President Donald Trump and China’s President Xi Jinping, a White House official reported the leaders agreed the Strait of Hormuz should remain open and that Iran should never acquire nuclear weapons. China maintains close ties with Iran and purchases most of its oil.
Prospects for a lasting peace agreement between the U.S. and Iran have diminished this week, leaving the Strait of Hormuz, a critical passage for global energy supplies, effectively closed to maritime traffic. Trump plans to request Chinese President Xi Jinping’s assistance in ending the conflict, though he previously stated he did not require help.
The surge in has renewed concerns about stagflation, a combination of higher inflation and slower economic growth, leading investors to anticipate rate increases from the ECB.
Money market traders now estimate a nearly 90% probability of a rate hike at the June 11 meeting, with three increases almost fully expected by year-end. Before the conflict, investors anticipated the ECB would maintain its deposit rate unchanged throughout 2026.
Many European investors were absent on Thursday for the Ascension Day holiday.
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