Italy’s 10-year BTP yield rose above 3.7%, reaching its highest level since May 2025, as rising tensions in the Middle East fueled inflation worries and reinforced expectations of further interest rate hikes. Oil prices continued to climb, briefly surpassing $100 per barrel after Iran intensified attacks on oil and transportation infrastructure across the region. The International Energy Agency’s announcement of a 400-million-barrel release from strategic reserves provided little immediate relief, as the supply may take weeks or months to reach the market. Money markets are fully pricing in a European Central Bank rate hike by July, with an 85% probability of another increase by December. This marks a sharp shift from late February when traders had assigned roughly a 40% chance of an ECB rate cut before year-end.
