Ahead of a G7 meeting in Paris, Eurogroup President Kyriakos Pierrakakis emphasized the vulnerability of the global economy to external shocks, particularly due to the ongoing conflict in the Middle East. He stated that resolving the situation in the Strait of Hormuz is crucial for mitigating economic impacts.
While the European economy has shown resilience amid the energy crisis, Pierrakakis warned that the global economy will still face pressure, even with a swift resolution to the conflict.
Recently, long-term borrowing costs in several G7 nations have increased as investors react to inflation concerns stemming from tight energy supplies, exacerbated by the conflict affecting oil and gas flows through the Strait of Hormuz. For instance, U.S. Treasury yields rose significantly, with the 30-year bond yield reaching 5.121%, the highest since May 2025.
In the U.K., 30-year government bond yields are at their highest levels since the late 1990s, influenced by political instability and inflation worries. Japan, a major energy importer, has also seen a sharp rise in bond yields. The relationship between bond yields and prices indicates that higher yields often reflect decreased confidence in the issuing government.
Meanwhile, oil prices have surged, with Brent crude futures closing at $109.26 per barrel and U.S. West Texas Intermediate futures at $105.42 per barrel. Brent prices have increased by 74% year-to-date, although they remain below the April peak of $118 per barrel.
The International Energy Agency has warned that rapidly declining global oil inventories, due to supply disruptions, could lead to future price spikes, especially as demand peaks this summer