Italy’s 10-year BTP yield climbed above 3.8%, reaching its highest point since April 2025, as markets increasingly anticipate ECB rate hikes before today’s policy announcement. The escalating US-Israeli conflict with Iran has driven energy prices up sharply, eliminating earlier hopes of rate cuts and reigniting inflation worries. Markets are now pricing in more than 55 basis points of ECB tightening by year-end, equivalent to at least two quarter-point hikes, with the first hike fully expected by June, a significant shift from pre-war expectations of possible easing.
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