The European Central Bank left its key rate unchanged at 2.25% on Thursday, despite a renewed surge in oil prices. The decision follows a quarter‑point hike six weeks ago, the first G7 tightening in response to the Middle East energy shock.

Since early July oil has risen more than 30%, breaching $99 a barrel after Iran‑backed Houthi militants claimed attacks on two Saudi tankers in the Red Sea, further tightening crude supply.

The ECB said the energy outlook remains “highly volatile” but is close to its baseline, which sees inflation peaking at 3.4% in the second half of 2026 and staying near 3% in early 2027. Eurozone inflation eased to 2.8% in June when oil prices fell on hopes of a US‑Iran de‑escalation.

Analysts see the door open for more tightening. Karsten Junius of Bank J Safra Sarasin said the statement “leaves the door wide open for another rate hike in September,” while Francesco Pesole of ING noted the ECB’s wording aims to keep markets leaning hawkish. Swap markets have fully priced two further quarter‑point hikes by Q1 2027, and the euro slipped 0.2% to $1.139.