31.03.202607:40:25UTC+00French Bond Yields Climb as Middle East Crisis Fuels Inflation Fears

France’s 10-year OAT yield remained above 3.75%, hovering near its highest level since June 2009, and was set to gain roughly 55 basis points over March. Investors have grown increasingly cautious about the economic fallout from the conflict in the Middle East, which has kept oil prices elevated following Iran’s attack on a crude oil tanker off Dubai. Heightening the uncertainty, reports suggested that US President Donald Trump was prepared to end the US military campaign against Iran even if the Strait of Hormuz remained largely closed. The resulting surge in oil prices has pushed inflation higher across Europe, with France’s EU-harmonized inflation rate rising to 1.9% in March from 1.1% in February. In response, markets have abandoned earlier pricing of roughly a 40% probability of an ECB rate cut and are now anticipating at least two interest rate hikes in 2026. French central bank governor François Villeroy de Galhau reaffirmed the ECB’s commitment to tackling energy-driven inflation, while emphasizing that it was still too early to discuss the exact timing of any policy moves.