Middle East conflict drives oil prices close to $100, major government bond yields hit new highs

(1) During Thursday's European trading session, both US and UK 10-year government bond yields rose to two-month highs, while Germany's 10-year government bond yield touched its highest level since 2011, mainly driven by escalating Middle East military conflicts pushing Brent crude towards the $100 per barrel mark. (2) The continued rise in oil prices has intensified market concerns about recurring inflation, and investors have begun repricing the potential risk of major central banks maintaining tightening or even further rate hikes. Some institutional sources pointed out that energy market dynamics clearly reflect how geopolitical risks are rapidly transmitted to inflation expectations and interest rate paths. (3) Germany's 10-year yield climbed to around 3.21%, the US 10-year rose to about 4.68%, the UK 10-year jumped to around 5.09%, while Brent crude surged nearly 3.8% on the day. Oil prices have resumed their upward path since the US announced the ceasefire agreement failure in early July. (4) The US military has continuously struck Iran, while Houthi forces claimed to have attacked two Saudi tankers in the Red Sea, intensifying market concerns over the security of the Bab-el-Mandeb Strait, the second key shipping route. The US is sending more troops and equipment to the Middle East, leaving room for larger-scale military options. (5) The sharp increase in oil prices presents new considerations for the European Central Bank ahead of its upcoming rate decision. The market generally expects a hold this round, but the probability of a rate hike in September has increased. Next week, the Federal Reserve and Bank of England are also expected to keep rates unchanged but may deliver hawkish signals. Deutsche Bank expects the Federal Reserve to raise rates by 25 basis points each in September and December.