FX.co ★ France’s Borrowing Costs Surge to 17-Year High Amid Iran Tensions

France’s 10-year OAT yield climbed toward 3.9%, touching levels last seen in June 2009 and set to finish March more than 60 basis points higher. The surge comes as the Iran crisis drives energy prices sharply higher and forces a radical reassessment of ECB policy—from previously expected rate cuts to at least two rate hikes this year, with a third now seen as possible. The standoff deepened after President Trump extended his deadline for Iran to reopen the Strait of Hormuz, while conflicting statements from Washington and Tehran cast doubt on any diplomatic breakthrough. Although German Foreign Minister Johann Wadephul confirmed ongoing indirect talks and planned direct negotiations in Pakistan, markets are discounting the likelihood of a swift agreement, viewing the extension instead as a step to consolidate military leverage. Adding to the pressure, Spain’s inflation jumped to 3.3%, its steepest increase since June 2024, driven by surging fuel costs and underscoring mounting inflation risks across Europe.