ECB Raises Interest Rates Again as Iran War Drives Up Energy Costs

The European Central Bank (ECB) raised interest rates for the second time this year on Thursday, aiming to combat inflation driven by higher energy costs resulting from the Iran war.

The euro weakened 0.3% to around $1.159 following the decision, while euro zone government bond yields edged up to fresh multi-year highs.

Oil prices surged more than 4% to $105.3 a barrel, adding to investor concern about sustained inflation pickup.

Mark Wall, Chief European Economist at Deutsche Bank, cautioned that the ECB still needs to tread carefully, as the economy has been resilient over the last six months but rapidly rising gas prices will eventually hurt growth.