Brent crude surged from about $70 to a peak of $118 per barrel following the outbreak of conflict in the Middle East, rattling the eurozone’s inflation outlook.
This jump sent inflation in the euro area up to 3.2% in May 2026, well above the European Central Bank’s 2% target and prompting the ECB to raise its deposit rate to 2.25% in June, marking its first increase since 2023.
The escalation began with coordinated strikes by Israel and the US against Iran on February 28, 2026. Oil prices shot past $90 almost instantly and climbed further as worries about supply through the Strait of Hormuz intensified.
Despite the sharp rise, the ECB described the oil price reaction as “surprisingly restrained,” signaling deep concern about what might still be ahead.
Looking ahead, the ECB projects oil prices could swing anywhere from $88 to $166 per barrel in the third quarter of 2026, depending on the conflict’s severity.
Before this turmoil, the ECB had been easing rates through 2024 and 2025, responding to cooling inflation after the pandemic. The June hike represents a notable pivot in policy.
The central bank’s focus remains firmly on traditional markets, with no mention of cryptocurrencies or digital assets in their recent analysis.
The wide oil price range creates uncertainty for investors. If prices hover near $88, inflation pressures might ease, allowing the ECB to pause on further hikes. But at $166, Europe risks stagflation, with economic growth stalling amid rising prices.
This article is for informational purposes only and does not constitute financial advice.
