German 10-year Bund yields slipped back to around 2.95%, partially reversing the previous session’s sharp eight-basis-point rise, as global bond markets reacted to easing oil prices and shifting geopolitical signals from the Middle East.

The decline came amid renewed uncertainty over diplomatic developments involving the U.S. and the Israel–Lebanon conflict. U.S. President Donald Trump and Israeli Prime Minister Benjamin Netanyahu offered differing accounts of a recent call, adding confusion to already fragile market expectations around de-escalation efforts. Trump said he had urged both sides to halt fighting, while Netanyahu’s version was less definitive.

At the same time, investors are closely monitoring reports that Iran has paused negotiations with Washington, reportedly demanding an end to the Lebanon conflict as part of any broader agreement. However, Trump insisted that talks were still progressing “rapidly,” reinforcing a divided and uncertain policy narrative that continues to ripple through global markets.

Bond markets have also been influenced by movements in energy prices, with Brent crude easing after recent gains tied to geopolitical tensions. The decline in oil prices has helped cool inflation fears, which in turn supported demand for sovereign debt and contributed to lower yields.

Attention is now turning to the upcoming flash Eurozone inflation data for May, which could offer fresh clues about how energy volatility is filtering into consumer prices. The data will arrive just ahead of the European Central Bank’s policy meeting next week, where money markets are currently pricing in a 95% probability of a 25-basis-point rate hike. A second similar move is widely expected before year-end, with some traders even considering a potential third increase depending on inflation persistence.