ECB chief economist Lane said inflationary pressures from the Middle East
conflict have not yet fully shown up and the bank must prepare. Despite a
US‑Iran deal to reopen the Strait of Hormuz, oil has not returned to pre-crisis
paths. Four months of elevated energy prices mean inflation is likely to exceed
3% in the transmission chain, with energy this year and next feeding indirectly
into food, goods and services. Investors and economists broadly expect at least
another 25bp ECB hike to about 2.5% and for inflation to remain above the 2%
target for a period. Even if shipping normalizes, oil supply normalization will
take months, so high energy costs are likely to increasingly pass through to
consumer prices; oil is unlikely to fall sharply from around $80–81 a barrel.
