Euro Surges Ahead of ECB Meeting Amid Escalating Energy Tensions

The euro strengthened to its highest level since late August, reaching $1.164 as investors positioned themselves ahead of the European Central Bank's (ECB) policy meeting on Thursday.

Policymakers are widely expected to raise interest rates while maintaining their data-dependent stance, with the ongoing conflict involving Iran adding uncertainty to the inflation outlook.

The escalation of tensions in the Middle East has also driven up energy prices, with Brent crude briefly hitting $100 a barrel for the first time since July 24 and European natural gas prices reaching fresh three-and-a-half-year highs.

Markets are currently pricing in two ECB rate hikes in 2026, with the deposit rate expected to reach 3% by late 2027.