European Central Bank Governing Council member Primoz Dolenc justified Thursday's interest-rate increase as necessary to keep prices in check amid escalating Middle East tensions. Speaking to Bloomberg Television, the Slovenian central-bank chief said policymakers needed to act to maintain their primary mandate of price stability while assessing broader geopolitical risks.

The hike marked the ECB's first rate increase directly attributed to the Iran conflict, breaking from the bank's previous cautious stance. "It's just enough for now to follow our main path," Dolenc said, noting the decision gives officials room to evaluate how regional instability affects eurozone inflation and growth prospects in upcoming meetings.

Markets responded with cautious optimism, as bond yields ticked higher and the euro strengthened modestly against major currencies. The move signals renewed concern that energy price shocks and supply chain disruptions could reignite inflationary pressures across the currency bloc.

The ECB's shift toward preemptive tightening reflects mounting pressure on European policymakers to balance growth headwinds against persistent inflation threats, particularly as oil prices remain volatile amid ongoing regional conflicts.