European government bond yields were largely unchanged on Tuesday, with Germany’s benchmark 10‑year yield at 3.05% and the 2‑year yield falling 7.4 basis points after reaching its highest level since 20 May.
Tensions between Israel and Iran subsided after both sides announced a halt to recent exchanges of attacks, raising hopes that US‑led diplomatic efforts by President Donald Trump may prevent a broader regional conflict. The Strait of Hormuz, a key route for about 20 % of global oil and LNG shipments, remains largely closed to tanker traffic, and the US has pledged to maintain a blockade on Iranian ports.
Market participants are focusing on the European Central Bank’s policy meeting scheduled for Thursday, where a first interest‑rate increase in a year is widely expected. Money markets are pricing roughly 68 basis points of additional tightening by year‑end, implying one more quarter‑point hike and a greater than 70 % probability of a subsequent move.
Barclays analysts anticipate the ECB will raise rates at the meeting while keeping flexibility for future decisions. They note that the magnitude of the current energy shock makes a “look‑through” strategy untenable and warn that persistent high energy prices could shift the policy outlook toward tighter monetary stance.
