Euro zone government bond yields edged lower on Friday after climbing to multi-year highs in the previous session, as investors paused to assess the outlook for inflation and interest rates following a pullback in oil prices, as per a Reuters report.

Germany's benchmark 10-year government bond yield slipped about 1.5 basis points to 3.1965% after reaching a 15-year high of 3.2118% on Thursday.

Bond markets across the euro zone have faced sustained selling pressure this week, reflecting concerns over the region's vulnerability to higher imported energy costs. Oil prices surged above $100 per barrel for the first time since May amid escalating geopolitical tensions in the Middle East. However, Brent crude futures fell 2.1% on Friday to $98.59 a barrel, although they remained on track for a weekly gain of around 12%, according to Reuters.

Energy prices have been driven higher by renewed hostilities in the Middle East and concerns over the emergence of another shipping bottleneck that could disrupt global energy supplies. The sharp increase in energy costs has reignited inflation concerns and prompted traders to increase bets on further monetary tightening by major central banks.

The European Central Bank kept interest rates unchanged on Thursday, in line with market expectations, but left open the possibility of another rate increase in September. Several ECB policymakers reiterated on Friday that inflation risks remain elevated and acknowledged the possibility of another rate hike, though none explicitly backed an increase at the next policy meeting.

Financial markets continue to price in a strong probability of an ECB rate hike in September, with expectations also reflecting the possibility of an additional increase later this year.

Germany's two-year bond yield, which is more sensitive to monetary policy expectations, declined about 3 basis points to 2.8593% after touching its highest level since July 2024 in the previous session.

Fresh inflation concerns were reinforced by new U.S. trade measures. The Trump administration imposed tariffs of 10% and 12.5% on imports from 60 trading partners, including the European Union, citing concerns over enforcement of forced labour restrictions, as a temporary 10% global tariff expired.