European Central Bank President Christine Lagarde said policymakers are carefully weighing their response to the Iran war and its inflation impact, telling Spain's RTVE they must act neither prematurely nor too late. The central bank faces what she described as massive uncertainty as it assesses the conflict's economic fallout across the eurozone.

Lagarde said policymakers need a lot more data to fully understand the repercussions of the conflict on European inflation and growth. She declined to specify whether the ECB will raise interest rates next month, despite widespread market expectations for a rate hike. The Iran conflict has added another layer of complexity to the ECB's ongoing battle against elevated inflation.

The ECB has been fighting stubbornly high inflation across the 20-member currency bloc for months, and geopolitical turmoil threatens to prolong those challenges. Markets are closely watching for signals of the bank's next move, with the next policy meeting scheduled for June. The delicate balance between controlling inflation and supporting economic growth remains the central bank's primary dilemma.