French inflation has risen to its highest level in over two years, providing support for the first interest rate hike by the European Central Bank since 2023. Data released on Friday shows that, driven by soaring energy costs due to the war, France's harmonized CPI for May reached an annual rate of 2.8%, higher than April's 2.5% but slightly below market expectations of 2.9%. The French data marks the beginning of a day of inflation data releases from major eurozone economies, which will help ECB officials assess the extent to which the Middle East conflict is driving up inflation and whether a policy response is necessary. Market expectations suggest that price pressures in Spain and Italy will further intensify, while German inflation may see a slight dip. However, inflation rates in all countries are expected to remain significantly above the ECB's 2% target. The overall eurozone inflation data to be released next week is anticipated to further exceed the 3% level reached in April. Since the military action against Iran began three months ago, ECB officials—from hawkish members like Schnabel to dovish chief economist Lane—have signaled that an interest rate hike may be necessary. Although the ECB chose to keep rates unchanged in April, meeting minutes indicated that officials had already identified some second-round inflation effects as "inevitable," with the key questions being the scope, intensity, timing, and duration of these impacts.