European government bond yields rose modestly on Monday, as energy prices surged following the United States' announcement of a blockade of the Strait of Hormuz. Yields on 10-year German and UK government bonds increased by 3 basis points, while yields on Italian and French 10-year bonds climbed by 4 basis points. Traders increased their bets on the scale of interest rate hikes by the European Central Bank and the Bank of England in 2026 by 5 basis points. These movements were relatively subdued compared to the 7% jump in Brent crude oil prices. Since the onset of the Middle East conflict, bond prices have shown a stronger correlation with the trajectory of Brent crude. The benchmark Brent crude price had declined at the close of European bond markets on Friday. Yield changes across most maturities were broadly consistent, except in the United Kingdom. The yield on UK 2-year government bonds rose by 5 basis points, a larger increase than the 3 basis point gain for the 30-year benchmark bond.

Market Data: The yield on German government bonds increased by 3 basis points to 3.09%. German government bond futures fell by 4.00 points to 124.74%. The yield on Italian 10-year government bonds rose by 4 basis points to 3.88%. The Italy-Germany government bond yield spread remained largely unchanged at 79 basis points. The yield on French 10-year government bonds increased by 4 basis points to 3.75%. The yield on 10-year UK government bonds rose by 3 basis points to 4.87%.