ECB to hike rates as Iran war fuels fresh inflation fears

The European Central Bank (ECB) is expected to increase interest rates by a quarter of a percentage point on Thursday, marking the second hike this year, due to inflation driven by the Iran war. Military and economic strikes by the U.S. and Iran have caused oil prices to spike back above $100 per barrel, reigniting concerns over a potential wave of price hikes across the fuel-importing euro zone.

Economists anticipate the ECB to raise its policy rate to 2.50% from 2.25% and signal readiness for further tightening if inflation remains high. ECB President Christine Lagarde and her colleagues are expected to take solace from recent growth data, as the 21-country euro zone economy has performed better than expected despite rising fuel costs and other global factors.

However, some economists believe Thursday's move may be the ECB's final rate hike for now, as financing conditions have already tightened and yields are already at historically high levels.