Long-term interest rates in Germany, France, the United Kingdom, and the United States have surged since the start of the conflict in the Middle East.
Things are heating up in bond markets. Around 4 p.m. in Paris, the interest rate on U.S. ten-year debt reached 4.68%, up from 4.59% the previous day. The equivalent for thirty-year maturity was 5.18%, the highest since 2007.
In Europe, the yield on German ten-year bonds reached 3.19%, compared to 3.14% the day before, levels similar to 2011. The French equivalent was at 3.97%, up from 3.77%. The Italian ten-year rate increased by 0.06 percentage points to 3.97% compared to Monday night, as did the UK’s ten-year rate, which reached 5.14% from 5.06% the previous day.
Inflation and economic crisis loom large as bond rates spike due to increasing investor concerns over the Middle East blockade and prolonged closure of the Strait of Hormuz. The risk of defaults on state debt could rise with struggling economies adding to state debt burdens.
Investors are anticipating a possible hike in central bank interest rates in the coming months, which would increase the cost of borrowing and lead to higher demands for compensation from borrowers.
Oil prices remain a cause for concern among markets for a potential return of inflation. By 4:30 p.m., the Brent crude oil from the North Sea was trading at $110.23 per barrel (+0.48%), while the WTI, its North American equivalent, was priced at $103.48 (-4.75%).
The dollar, as the international currency for oil markets, has seen value appreciation against the euro (+0.45%), with 1.1603 dollars for one euro.
Investors seem increasingly convinced that with higher U.S. interest rates persisting, the demand for the dollar will only grow, according to market analyst Fawad Razaqzada from Forex.com.
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