DBS Group analyst Radhika Rao says US-Iran tensions will deliver a stagflation shock to the euro area, hitting Europe harder than the US and likely forcing the ECB to tighten earlier. She expects the ECB to lift the deposit rate by 25bp to 2.25% and to keep policy guidance cautious and hawkish; further hikes remain possible in H2 as the ECB adopts a meeting-by-meeting assessment while closely monitoring the prospect of a US-Iran ceasefire and de-escalation. Rao cuts her 2026 euro-area growth for

DBS Group analyst Radhika Rao says US-Iran tensions will deliver a stagflation shock to the euro area, hitting Europe harder than the US and likely forcing the ECB to tighten earlier. She expects the ECB to lift the deposit rate by 25bp to 2.25% and to keep policy guidance cautious and hawkish; further hikes remain possible in H2 as the ECB adopts a meeting-by-meeting assessment while closely monitoring the prospect of a US-Iran ceasefire and de-escalation. Rao cuts her 2026 euro-area growth forecast to 1.0% and expects inflation to rise.