Frankfurt: Fresh fighting in the Middle East and rising oil prices have put the European Central Bank (ECB) on alert ahead of its imminent rate-setting meeting.
Two weeks of renewed conflict between Iran and the United States have once again slowed traffic through the Strait of Hormuz to a trickle, restricting energy exports on a waterway that in peacetime carries about a fifth of the world’s oil and natural gas.
The ECB in June became the first major central bank to raise rates after the near total closure of the strait, putting rates up a quarter of a percentage point to 2.25%.
The memorandum of understanding (MoU) signed last month by Washington and Tehran raised hopes of a durable solution to the conflict, but the resumption in fighting has sparked fears that eurozone inflation – which in June eased to 2.8% – might pick up again.
Energy prices have reversed the decline that followed the signing of the MoU between the United States and Iran, making the benign inflation data for June an old piece of information, analysts said. — AFP
