Euro zone yields fall after Iran raises prospect of Hormuz reopening

Tensions in the Middle East remain elevated, however, with Houthi fighters pushing to seize more Saudi-held territory in Yemen. The rapid advance by the Iran-backed group has widened the regional conflict in recent weeks.

French government bonds underperformed their peers as investors continued to focus on France's budget debate and the run-up to the 2027 presidential election.

The spread of French over German 10-year yields, a gauge of the risk premium attached to French debt, rose to its highest since 2012 at 105.6 bps and was last up 3 bps DE10FR10=RR.

The dip in energy prices helped pull yields lower globally after a surge in recent weeks fuelled by expectations of further interest-rate hikes to combat energy-driven inflation. Traders are pricing in around 35 bps of additional European Central Bank tightening this year, down from 40 bps on Friday.