LONDON - Euro zone government bond yields rose on Monday, rising for the fourth day in a row, as the escalating Iran war stoked ​inflation concerns and ⁠shifted central bank interest rate expectations.

Central bankers around the world last week raised the alarm on ‌inflation risks as spiking oil prices and little hope for any de-escalation of the conflict in the Middle East dominated markets, ​with global bonds coming under pressure.

Iran's Revolutionary Guards said on Monday that the country will attack Israel's power plants ​and plants ​supplying U.S. bases in the Gulf if President Donald Trump carries out his threat to "obliterate" Iran's power network. On Saturday, Trump had warned that Iranian power plants would be destroyed if Tehran ⁠failed to "fully open" the Strait of Hormuz to all shipping within 48 hours.

"Markets look set to remain in sell-off mode as latest headlines out of the Middle East point to prolonged energy price increases," Commerzbank rates strategist Hauke Siemssen said in a note.

Yields on the German 10-year Bunds, which serve as a benchmark ​for the wider ‌euro zone, were ⁠last up 2.3 ⁠basis points to 3.0608%, after having risen to their highest level since 2011 on Friday. Since the start of the ​Iran war, German 10-year yields have risen over 40 bps.

As inflation concerns ‌have accelerated, central bank policy expectations have been upended.

Market pricing last ⁠indicated an over 87% probability of the European Central Bank hiking rates at its next meeting in April, with at least three increases expected this year.

Goldman Sachs on Monday said it expects the European Central Bank to deliver two 25 basis point interest rate hikes in April and June.

"At the April meeting, only a few data pointers for March will be available, which would render a potential hike a risk management exercise and a sign of commitment to stay ahead of the inflation curve. More hawkish-leaning council members like Nagel seem in favour of an April hike, while centrist council members ‌should ultimately tip the balance," Siemssen said. 

Shorter-dated bonds, which are more ⁠sensitive to policy expectations, have been hit hardest.

German 2-year yields were last ​up 7.2 bps to 2.7404%, having risen around 73 bps so far this month. Yields on the two-year Schatz were nearly 33 bps higher than they were last Monday, making this their largest week-on-week increase since April ​2023, when markets ‌were emerging from the regional banking crisis.

Italian 2-year yields rose 10 bps on ⁠Monday to 3.0565%. They have jumped around ​92 bps since the Iran war began.

(Reporting by Sophie Kiderlin; Editing by Toby Chopra)