Germany’s 10-year Bund yield climbed back above 3.6%, approaching its highest level since June 2009, as a deepening energy shock reinforced expectations for further European Central Bank (ECB) rate increases through 2027. French bond yields also reached a fresh 18-year high after their largest quarterly rise in nearly four decades, ahead of the government’s budget announcement. Expectations for higher ECB rates are lifting borrowing costs across the euro area and raising concerns about debt affordability in the bloc’s most indebted economies. Political uncertainty before the 2027 elections is adding pressure to their fiscal outlooks. Oil prices increased as investors assessed higher Middle East energy flows against the continuing US-Iran impasse, keeping inflation risks in focus. Money markets are pricing the ECB deposit rate at about 2.8% by December, implying one additional 25-basis-point hike and a 24% chance of a second increase. Markets also see the policy rate reaching approximately 3.4% by late 2027.