ECB Hikes Interest Rates Amid Iran War-Driven Inflation Fears

The European Central Bank (ECB) has raised interest rates for the second time this year to combat inflation triggered by the Iran war. The decision comes as oil prices have risen above $100 a barrel, sparking concerns about fuel price hikes in the euro zone.

The ECB's policy rate is now 2.50%, up from 2.25%. Despite the increase, inflation is expected to remain above the 2% target through 2028, driven by resilient economic activity and higher fuel costs.

ECB President Christine Lagarde acknowledged that gas prices could rise due to supply disruptions or an unusually cold winter, adding to inflationary pressures. The bank's growth projections were also revised upwards, with the euro zone economy expected to grow 0.9% in 2026 and 1.5% in 2028.