Four people directly involved in the discussions said energy prices unexpectedly
fell sharply last week, further reducing pressure on ECB policymakers to raise
rates next month, though the case for a modest additional hike remains intact.
The ECB's increase this month was aimed at preventing an Iran-war driven oil
spike from lifting market inflation expectations; officials are now debating the
urgency of subsequent tightening. Futures at several key maturities have fallen
faster than the ECB's previously outlined "mild" tightening scenario. Earlier
concerns about fuel shortages, including jet fuel, have proved excessive as some
oil producers, notably Saudi Arabia, have supplied more than expected to
stabilize markets. Even after last weekend's Iran–US escalation, oil showed
little reaction, suggesting normalization in energy markets.
