Oil Prices and Middle East Tensions: Impact on Euro Zone Bond Market

On Monday, Euro zone government bonds steadied as the retreat in oil prices helped pacify investor fears over inflation stemming from the escalating conflict in the Middle East. Iran lambasted U.S. President Donald Trump for joining Israel's military campaign, extending potential targets for its armed forces.

The euro zone economy showed no growth for the second consecutive month in June, as indicated by a recent survey. German 10-year bond yields, which set the standard for the euro zone, remained stable at 2.51% in European afternoon trading, despite spiking earlier in the session.

Meanwhile, U.S. benchmark 10-year note yields rose slightly in London trade. However, Germany's plan to increase defense expenditure didn't significantly impact the Bunds. Oil prices, a significant market influencer, initially surged 6% before declining by 1%, stirring predictions that new oil price fluctuations may shift the current economic narrative.

(With inputs from agencies.)