France’s 10-year OAT yield slipped to 3.37% on Wednesday, pausing after a sharp rise earlier in the week fueled by fears that the conflict in the Middle East could stoke inflation. Investors also weighed reports that Iran had signaled a willingness to discuss terms for ending the war following US-Israeli strikes, though Israeli officials have urged Washington to dismiss the proposal.
With energy prices surging, inflationary pressures across Europe are expected to remain elevated, reinforcing a hawkish stance at the European Central Bank. Data for February showed Eurozone headline inflation at 1.9% year-on-year and core inflation at 2.4%, both above expectations. Markets now assign roughly a 40% probability to an ECB rate hike by year-end, a sharp reversal from last week, when similar odds were placed on a rate cut.
