The European Central Bank is closely monitoring surging energy costs following the Iran conflict, with Governing Council member Joachim Nagel warning of potential inflationary pressures. With the deposit rate at 2%, the ECB remains positioned to respond if needed. Nagel emphasized the central bank's vigilance against second-round effects after energy prices jumped.

Recalling the price shock from Russia's invasion of Ukraine, Nagel stressed policymakers' determination to prevent similar inflationary spirals. The Bundesbank president noted that services inflation has remained above 3% and is proving stubborn. He warned that energy prices are currently a major factor stirring up the market.

Analysts estimate that prolonged conflict beyond a month would be problematic for Europe's economic outlook. Consumer surveys show over a third worry about being overburdened by inflation. While financial markets don't expect immediate rate changes, the ECB will assess latest data at its next meeting to determine if the current monetary-policy stance remains appropriate.