France’s OAT Yields Rise Amid Middle East Unrest and Inflation Pressures

France’s 10-year OAT yield climbed above 3.7%, approaching 17-year peaks, as the unresolved Middle East conflict drove oil prices higher and stoked inflation concerns. The US asserted Iran’s urgency for a deal while deploying additional troops to the region, but Iran’s foreign minister rejected negotiations, insisting on control over the Strait of Hormuz. Investors now anticipate two to three ECB rate hikes by year-end, following ECB President Christine Lagarde’s warning that the bank stands ready to act "at any meeting" to mitigate inflation risks from energy price shocks.

France’s 10-year OAT yield fell below 3.7%, pulling back from 17-year highs, as optimism over potential Middle East de-escalation eased inflation concerns. Reports of a US peace proposal to Tehran, despite Iran’s denial, pushed Brent crude below $100 a barrel, reducing fears of energy-driven price surges. Investors now expect only two ECB rate hikes by year-end, down from three. ECB President Christine Lagarde reaffirmed the bank’s readiness to respond "at any meeting" if energy shocks threaten broader inflation. Meanwhile data on Tuesday showed French business activity contracted more than anticipated in March, with weak demand and soaring input costs weighing on economic momentum.

France’s 10-year OAT yield hovered around 3.75%, slightly below a recent 17-year high of 3.87%, as uncertainty around the developments in the Middle East continued to dominate the market while investors digested weaker than expected PMI data. President Trump delayed US strikes on Iran, referencing "positive talks", a claim Tehran rejected, though indirect negotiations may be underway. Meanwhile, an Israeli official dismissed ceasefire hopes, while Defense Minister Israel Katz reaffirmed plans to "strike Iran with full force." Economically, Eurozone business activity slumped to a ten-month low in March, with costs surging at the fastest pace in over three years due to rising energy prices and war-related supply chain strains. In France alone, output contracted more than expected. Amid the energy shock, markets are pricing in further ECB rate hikes, even after the central bank held rates but upgraded inflation forecasts and downgraded growth outlook due to deepening regional instability.