Bund yields hit highest since October 2023 as oil prices jump

March 12 (Reuters) - Euro area benchmark Bund yields hit their highest level in almost 2-1/2 years on Thursday, as Middle East conflict fuelled inflation fears and expectations for interest rate hikes.

Oil prices jumped back briefly above $100 a barrel as Iran stepped up attacks on oil and transport facilities across the Middle East.

Germany’s 10-year government bond yield DE10YT=RR rose 3 basis points (bps) to 2.96%, its highest since October 2023.

Money markets were fully pricing a European Central Bank rate hike by July, with an 85% chance of second increase by December EURESTECBM7X8=ICAP

In late February, before the outbreak of the war, traders had attached a roughly 40% chance of a rate cut from the ECB before year-end.