Global bond rout pushes euro zone yields higher and bunds hit 15-year peak

* UK political uncertainty spurred wider anxiety

* Iran war still the biggest ​focus

* Traders watch ⁠for signs inflation feeding through to real economy

LONDON, May 18 (Reuters) - Euro zone bond yields hit multi-year highs on Monday as part of a broader global bond selloff as investors worried that higher ​energy ‌prices caused by the Middle East conflict could drive inflation and further interest rate hikes. The yield on the German 10-year bond, the benchmark for the ⁠euro zone, touched a 15-year high at 3.193%, and was last up 0.5 ⁠bps to 3.16%.

On Friday, the yield had ​also risen as much as 8.5 bps to its highest level since May 2011. Bonds from Tokyo to New York extended losses on Monday as investors grew increasingly jittery about inflation as the deadlock in the Iran war dragged on.

Italian 10-year yields fell one bp ​to 3.93%, earlier ‌hitting their highest level in six weeks.

UK POLITICAL UNCERTAINTY WAS A CATALYST FOR WORRY European Central Bank head Christine Lagarde, asked on Monday if she was worried by the bond selloff, replied to reporters: "I always worry, that's my job!”

Germany's 2-year bond yield was down one bp at 2.72% while Italy's 2-year yield fell 1.5 bps at 2.93%

"Inflation and deficit concerns have been ​in the background for a while. UK was probably the catalyst for bringing these concerns to the fore," wrote Mohit Kumar, chief ‌economist for Europe at Jefferies. The political uncertainty linked to pressure on British Prime Minister Keir Starmer to quit led UK 10-year gilt yields to fall 3.5 bps on Monday after they ‌on Friday registered their biggest daily slump since April 2025. But the Iran war remained the main focus for markets on Monday, said Olle Holmgren, strategist at SEB Research, who added that he would be watching PMIs due out of the euro zone ​and the UK later this week.

"The impact on growth is interesting, but it will also be interesting to see what happens to both input and output ‌prices - especially output prices where you saw a relatively large increase in Germany in April," he said. UK PMIs for April will hit screens later this week as will euro zone PMIs, followed by the euro zone consumer confidence survey and Germany's Ifo survey.

Commerzbank ⁠analysts said ⁠in a note that they expected Bunds to remain rangebound for the first half ‌of the week as markets digest Friday's steep moves, with data later this week serving as a reality check.

"Given the front-end has come a long way ​and the ceasefire in Iran that ​is fragile but enduring so far, 10y yields look set to consolidate near current levels," ‌they wrote.

Traders will be looking for any hint that inflation is feeding through to the real economy, as they wait to see how central banks react to rising prices.

Markets are placing an 85% chance on a 25 bps hike at the European Central Bank's next meeting. (Reporting by Lucy Raitano; Editing by Andrew Cawthorne and Barbara Lewis)