France’s OAT Yield Rises on Ceasefire, Oil Surge

France’s 10-year OAT yield rebounded to 3.64% on Thursday, trying to recover from a 21-basis-point drop from the previous session. The shift followed mounting skepticism over the US-Iran ceasefire, which pushed oil prices higher and reignited inflation worries, particularly after Israel’s deadliest Lebanon airstrikes yet, killing hundreds and drawing Iranian retaliation threats. Tehran rejected further US negotiations, while the Strait of Hormuz blockade kept pressure on the fragile truce. US President Donald Trump escalated tensions by pledging to maintain forces near Iran until a “real agreement” is secured. Markets adjusted expectations, pricing in tighter ECB policy with at least two rate hikes anticipated by end-2026.

France’s 10-year OAT yield fell 25 basis points to 3.55% as oil and European gas prices dropped following the US-Iran ceasefire agreement. The accord, which pauses the US-Israel military offensive in exchange for Iran reopening the Strait of Hormuz, has raised hopes for a short-term easing of Middle East tensions, though deeper disputes linger. With geopolitical pressures easing, investors lowered their expectations for ECB rate hikes, removing one anticipated increase from their 2026 outlook. Markets now forecast just two rate rises this year, down from previous projections.

France’s 10-year OAT yield increased toward 3.8% after the Easter holiday, moving closer to the multi-year highs seen at the end of last month, amid escalating Middle East tensions. Investors are proceeding with caution, adopting a "wait-and-see" stance as they monitor US President Donald Trump’s ultimatum for Iran to reopen the Strait of Hormuz and agree to a ceasefire, or risk military retaliation. Trump’s threat of large-scale strikes on Iranian infrastructure has pushed energy prices higher, leading markets to anticipate three interest rate hikes by the European Central Bank in 2026. ECB Governing Council member Pierre Wunsch told the Wall Street Journal that the bank may raise rates multiple times, starting as early as this month, if the Middle East-driven energy crisis lingers.