ECB Hike Odds Soar Amid Iran Conflict Fuelled Energy Price Surge

The European Central Bank (ECB) is now more likely than not to raise interest rates at its September meeting, driven by concerns over the escalating conflict in Iran and its impact on energy prices.

While underlying inflation remains contained just above target, officials are wary of hiking policy amid weak growth and the risk of a slowdown or recession. However, President Lagarde has made it clear that the ECB is watching developments in the Middle East closely, particularly with regard to oil prices threatening to undo progress on inflation.

The recent jump in energy prices, combined with the ongoing conflict, may force the ECB's hand and prompt preemptive action to safeguard its inflation-fighting credibility.