ECB expected to raise rates to 2.50% as oil hits $100/barrel amid Iran conflict

The European Central Bank is widely expected to raise interest rates for the second time this year to 2.50% from the current 2.25%. This decision aims to counter a fresh inflationary shock caused by soaring oil and gas prices following escalating military, shipping, and energy infrastructure attacks in August involving both the United States and Iran. Brent crude touched $100 per barrel on Wednesday, pushing fuel-importing nations across the euro zone toward broader price increases. Economists believe markets are already pricing in two or three additional rate hikes by the end of next year if inflation worsens. Inflation remains above the 2% target, while resilient economic growth and accelerated bank lending in July provide some room for tightening without triggering a recession. The latest energy surge may delay a return to price stability, even though it is unlikely to be fully reflected in the ECB's immediate economic projections.