Euro zone bond yields tumbled the most in over a year as oil prices crashed to their lowest levels since the Iran conflict began, easing inflation pressures across the region. Energy costs plunged, driving the first drop in French inflation since the war erupted and reducing expectations that the European Central Bank would raise interest rates further. Germany's 10-year bond yield fell 1 basis point to 2.848%.

Brent crude oil plunged 5% to $71.55 a barrel after an attack on a vessel in the Strait of Hormuz underscored the fragility of the regional truce. The resumption of shipping through the pivotal waterway alleviated supply fears that had fueled price spikes earlier this year. Markets responded by pricing in fewer ECB rate hikes, with a central bank survey showing consumers expect inflation to remain muted in the near term.

The yield drop reflected a broader shift in global markets, where lower-than-expected U.S. PCE inflation reinforced expectations of stable price pressures. Investors now focus on whether the recent softening in energy costs and inflation readings will persist, which could reshape the ECB's policy trajectory for the remainder of the year.