Short-dated government bond yields in the Euro zone have risen for the fourth consecutive day, influenced by escalating tensions in the Strait of Hormuz and rising oil prices. Germany's 2-year bond yield increased by 3 basis points (bps) to 2.57%, while the 10-year yield rose 4 bps to 3.04%. The recent surge in oil prices has heightened inflation concerns, prompting expectations of further rate hikes from the European Central Bank (ECB) later this year. Money markets are now pricing in a deposit facility rate of 2.59% by year-end, suggesting two potential hikes and a 35% chance of a third increase. The yield gap between Italian government bonds and German Bunds has also widened, reaching 76 bps, compared to 63 bps before the recent geopolitical tensions. Investors are closely monitoring Purchasing Managers' Index (PMI) data for insights into the inflationary impact of rising energy costs.