European policymakers confront a dilemma as the Iran‑Israel clash lifts Brent crude above $100 a barrel and pushes Eurozone gas costs up nearly 40%. The ECB and Bank of England are set to keep rates unchanged on Thursday, but markets price in at least two hikes later this year. Inflation in the euro area rose to 2.6% in March, up from 1.9% a month earlier.

Britain’s consumer price index shows inflation at 3.3% in March, a percentage point above the Bank of England’s 2% target, while German consumer sentiment fell to a low. The IMF projects eurozone growth at 1.1% this year, assuming an end to the conflict and a rebound in energy supplies. HSBC analysts call the ECB’s stance a ‘wait‑and‑see’ approach, warning supply shocks could force tighter policy.

The Federal Reserve also left rates unchanged, citing the same energy‑price pressures that have nudged U.S. inflation upward. With consumer sentiment slipping in Europe and growth forecasts trimmed, policymakers risk a trade‑off between curbing price spikes and stalling a fragile recovery. Market participants will watch upcoming wage data for clues on whether a second‑round inflation spiral is taking hold.