Analysts say the European Central Bank can no longer “look through” the energy shock triggered by the Strait of Hormuz closure. Their models, which once included a temporary dislocation, now focus on persistent inflation and possible shortages. With the next policy meeting only weeks away and no diplomatic breakthrough, a rate hike appears inevitable. Markets brace for tighter policy and its impact on growth.

The consensus is a modest tightening to 2.25 % at the June meeting, aligning the ECB with the Fed and Bank of England, which are already mildly restrictive. President Christine Lagarde hinted at a rise, and chief economist Philip Lane stressed the shock is global, not regional, prompting a more hawkish stance. Narrowing the gap with peers.

If energy prices stay near current levels, policymakers may add a second hike in September, pushing rates into restrictive territory. A worsening supply crunch could force up to four increases through 2026, reaching 3 %. Absent further escalation, the ECB is set to raise rates in June and hold firm thereafter. The market will price in the June hike quickly and monitor inflation path.