An agreement between the International Monetary Fund and Pakistan may allow the disbursement of $1.21 billion

Bond yields in the euro zone recorded a new sharp rise on Thursday in conjunction with the rise in energy prices, while investors continued to sell bonds of the most indebted countries, such as France and Italy, leading to a widening of the associated risk premium.

A global sell-off in bond markets, driven by increasing bets on raising interest rates by central banks, along with concerns about government debt burdens, pushed yields to their highest levels in decades in many euro zone countries, according to Reuters.

France was the most affected in recent days and weeks, as it struggled to control a budget deficit exceeding 5 percent of gross domestic product. This led to a jump in the risk premium on its bonds, one of the closely followed indicators, to its highest levels since the euro zone crisis in 2012.

The French 10-year bond yield rose 6 basis points to 4.931 percent on Thursday, approaching the 24-year high of 4.994 percent reached on Friday.

The spread between French and German 10-year bond yields, a measure of the risk premium associated with France, also widened by 4 basis points to 142 basis points. The spread reached about 160 basis points last week, its highest level since 2012.

In contrast, the German 10-year bond yield, which is the benchmark for bonds in the euro zone, rose by two basis points to 3.504 percent on Thursday. Yields move in the opposite direction to bond prices.

German bonds benefited this week from their status as a safe haven asset, as their yields fell sharply last week, while other bond yields jumped, and recorded a much lower rise this week compared to their counterparts.

The main driver for markets on Thursday was a rise in energy prices again, driven by concerns about supplies from the Middle East.

Brent crude rose 3 percent to $103 a barrel, approaching its highest price in a week.

“Risk sentiment remains fragile,” said Eric Lim, interest rate strategist at Commerzbank.

Meanwhile, 10-year US Treasury yields, which determine the course of borrowing costs around the world, rose 5 basis points to 5.331 percent. On Wednesday, yields reached their highest levels since 2002, before declining following a strong auction to sell 10-year bonds.

Lim added: “Given the potential catalysts for today’s session, it appears that the market’s attention will remain focused on any potential signals or clarifications that may be issued by the European Central Bank.”

Philip Lane, chief economist at the European Central Bank, is scheduled to speak later on Thursday, following comments on Wednesday by Emmanuel Moulin, head of the Bank of France, that France does not need ECB support at the moment.

Short-term bond yields, which are strongly influenced by the European Central Bank's interest rate expectations, also rose on Thursday, as the two-year German bond yield rose by two basis points to 3.056 percent.

Two-year German bond yields fell on Wednesday, after heavy selling in bond markets raised concerns about economic growth, prompting traders to reduce their bets on the European Central Bank raising interest rates further.

European stocks fell on Thursday, with bank shares falling to their lowest level in more than three months, while a fresh wave of bond selling and rising oil prices stoked fears that persistently high inflation could hurt economic growth.

The European Stoxx 600 index fell by 0.9 percent to 624.24 points by 07:23 GMT, according to Reuters.

European bank stocks fell about 2 percent, with shares of Deutsche Bank, Banco Santander, Société Générale, and UniCredit declining for the second day in a row, coinciding with the rise in bond yields in the euro zone toward their recently recorded high levels.

Oil prices rose by more than 3 percent amid continuing concerns about supplies from the Middle East, a major production region, while the threat of a hurricane to US naval operations reduced production.

Minutes of the Federal Reserve's most recent monetary policy meeting showed officials divided over the justifications for raising interest rates further. All eyes are now on Europe, where markets will analyze the minutes of the latest European Central Bank meeting for clues on the outlook for monetary policy.

A number of European Central Bank and Federal Reserve officials are scheduled to speak later in the day, along with Bank of England Governor Andrew Bailey.

In terms of individual stocks, Bavarian Nordic's stock rose by 2.9 percent, after the Denmark-based biotechnology company raised its forecasts for revenues and earnings before interest, taxes, depreciation and amortization margin for the year 2026.