ECB Hikes Rates Amid Iran War-Inspired Oil Price Surge

The European Central Bank (ECB) raised interest rates by a quarter percentage point to 2.5 percent on Thursday, aiming to cool inflation driven by high oil prices from the Iran war.

The decision was supported by a stronger-than-expected economy that suggests businesses can weather higher borrowing costs, according to ECB President Christine Lagarde.

Lagarde said at her news conference that 'the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.'

The bank's last rate hike was on June 11, and it had paused at its July 23 session. Lagarde emphasized that future rate decisions will be made meeting by meeting based on incoming data.

Inflation concerns are also weighing on the US Federal Reserve, whose next meeting is scheduled for September 15-16. Fed Chair Kevin Warsh has said the bank may have 'more work to do' to contain US inflation of 3.7 percent.