European markets turned defensive on the 14th as escalating Middle East tensions and surging energy prices revived inflation concerns, lifting government bond yields and weighing on equities. Germany’s 10-year Bund yield briefly reached 3.5544%, its highest level since mid-2009, while UK 10-year gilt yields climbed into the low 5.4% range, near their highest level since August 2007. French long-term yields briefly reached the 4.5% range, their highest since 2008, and the spread over German debt widened to the 0.9% range, its broadest in approximately 14 years. The Stoxx Europe 600 fell 0.4%, Germany’s DAX declined 0.2%, France’s CAC 40 and London’s FTSE 100 each dropped 0.4%, and Italy’s FTSE MIB lost nearly 1%. Brent crude rose 1.2% above $113 a barrel after Saudi Arabia blamed Iran-backed elements in Iraq for a pipeline strike that could affect up to 4% of global oil supplies, while further Houthi attacks weakened hopes for a near-term reopening of the Strait of Hormuz. Investors were pricing a 90% probability of a 25-basis-point Federal Reserve rate increase, the first since mid-2023, while the Bank of Japan and Bank of England also faced policy decisions and the ECB had raised rates by 0.25 percentage point to 2.50% the previous week. Technology and semiconductor shares also fell after OpenAI and Anthropic leaders called for a temporary slowdown in advanced AI development to establish global risk-management standards.