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In French, from whom we’ve borrowed the word, it’s /fɛt/ “fet”.
But if we pronounced it as if it were an English word after dropping the accent, it would be /fi:t/ “feet”.
Yet the pronunciation we actually use is /feɪt/ “fate”.
Does this derive from a confusion between the acute and circumflex accents, or is there some other reason for this?
Warning: The following explanation is pure speculation: I am not a linguist, just a French with an amateur interest in linguistics.
In French, fête was written feste (or feſte) before the 18th century, and its /ɛ/ was¹ long to compensate for the lost s (see this wikipedia page). So Its pronunciation at time of its arrival in English was probably /fɛːt(ə)/.
Then, if one looks at Wikipdia's article on the Great Vowel Shift, one sees a transition in English from /ɛː/ (17th century) to /eː/ (18th century), then /eɪ/ (from 19th century). This would perfectly explain the modern (English) pronunciation of fête as /feɪt/.
By the way, as a native French, I'm really used to hear the native English speakers pronounce French /ɛ/ as /eɪ/, both in borrowed words and when they speak French. To me, it is part as the English accent as strongly as /ɹ/ for /ʁ/. So the short answer is maybe : because they say a French word with an English accent [insert Monty Python Holy Grail jokes here ;-)]
¹: Some French speakers still distinguish between /ɛː/ and /ɛ/, but it is no longer part of the standard French pronunciation.
Does this derive from a confusion between the acute and circumflex accents, or is there some other reason for this?
I doubt it's to do with confusion over the accents, rather not really caring about them. The pronunciation likely evolved from /fɛt/ "fet to /feɪt/ "fate" independently of dropping the accent. It seems unlikely we would decide to drop the accent and only then sitting down (with a nice cup of tea) to decide how that word should be pronounced.
It's interesting to see the word is fairly recent; Online Etymology Dictionary says the English word is from 1754, "Apparently first used in English by Horace Walpole (1717-1797)".
Thinking about the variants of e in French, we seem to pronounce é quite properly, e.g. café. But in my experience, I've never heard élite as eɪˈliːt. I don't know how widely this exception to the general rule exists, or whether there are others like it.
Similarly, I usually hear words like crème enunciated properly.
Taking common words where the e-circumflex is often mispronounced in my locality, for example, crêpe and fête, I can only presume that this is caused by a misunderstanding of how circumflex accents work.
Though not directly related, another common mispronunciation is manœuvre as məˈnuːvə, rather than məˈnːəv.
It's a hard topic to cover the breadth of, because some words have been imported from Old French via Latin, for instance, and may be spelt the French way but pronounced like a Latin word.
It's commonly pronounced that way because it's one of those words that appears far more often in print than in the spoken language.
Everyone has heard someone mispronounce a word because they'd obviously read it before but never heard it spoken; fête is one of those words that many people are familiar with, but perhaps the majority of English-speakers have never heard spoken.
The vowel used in the French pronunciation /fɛt/ is not really used in modern English.
I suspect that the /feɪt/ (fate or fayt) pronunciation is a hyper-correction; to English ears the French word uses a vowel which is different from (and longer than) the English short e /e/, but in attempting to pronounce it properly there is a tendency to overshoot the target, and use the "next" vowel found in English - the /eɪ/ dipthong.
