The European Central Bank (ECB) welcomed news of a preliminary ceasefire agreement between the U.S. and Iran on Monday, as hopes of a reopening of the Strait of Hormuz pushed oil prices lower and reduced expectations of further interest rate rises in the eurozone.
U.S. and Iranian officials said they had reached a deal to end their conflict and reopen the vital shipping route, a key gateway for global energy supplies.
ECB President Christine Lagarde said the development was encouraging, although she stressed that major issues surrounding Iran’s nuclear programme remain unresolved.
"If this news is confirmed by developments in the coming days and the signing of a memorandum of understanding ... it is good news. We can only welcome it," Lagarde told France Culture radio.
She added that "the whole question of uranium enrichment remains to be debated, agreed and concluded in the form of an agreement."
The prospect of an end to the conflict immediately eased concerns about energy supply disruptions and inflationary pressures.
Financial markets, which had been pricing in two additional ECB rate increases over the next year, sharply reduced those expectations on Monday. Investors now expect just one further rate rise, with only a small possibility of another.
The ECB raised interest rates for the first time in nearly three years last week, aiming to curb inflation before rising energy costs linked to the Iran conflict spread further through the eurozone economy.
Despite the market optimism, several ECB policymakers cautioned that lower oil prices would not translate into an immediate reduction in inflation.
Joachim Nagel, a member of the ECB's Governing Council, said restoring energy supplies would take months even if the Strait of Hormuz reopened quickly.
"No relief is in sight for the foreseeable future," Nagel said in Frankfurt. "On the contrary: even if the Strait of Hormuz were to become navigable again soon, it will take months for the oil supply to return to normal."
Nagel also warned that eurozone inflation would rise once temporary government measures that lowered May's inflation reading expire. He maintained that all options remain open for the ECB's next policy meeting on 22–23 July, including keeping rates unchanged or raising them further.
Peter Kazimír echoed Nagel's concerns, arguing that the damage to oil supply chains could not be reversed overnight.
"We have taken a first step towards containing medium-term price pressures," Kazimír wrote in an opinion piece. "But the mission is not complete. With today's information, it is increasingly evident that monetary policy has more work to do."
Meanwhile, Martins Kazāks said rebuilding energy reserves would likely take time and stressed that every upcoming ECB meeting remains "live" for a potential interest rate increase.
While the U.S.-Iran ceasefire has eased fears of a prolonged energy shock and boosted hopes of stabilising oil markets, ECB officials remain cautious about declaring victory over inflation.
The central bank now faces the challenge of balancing improving geopolitical conditions with persistent price pressures, leaving the door open to further monetary tightening in the months ahead.
A Kyiv-Warsaw train was struck near the Polish border, Ukraine's state railway firm said on Sunday. No passengers were injured. Ukrai...
Maritime trackers received new reports of an attack on a ship in the Strait of Hormuz on Sunday, according to the ...
Indonesian rescuers are searching for 130 people after a passenger ship carrying 243 people sank in the Java Sea following bad weather, while 113 p...
Iranian President Masoud Pezeshkian arrived in New Delhi on Friday to attend the weekend BRICS summit, amid the ongoing U.S.-Iran conflict, joining a host of foreign dignitaries.
Maritime trackers received new reports of an attack on a ship in the Strait of Hormuz on Sunday, according to the UK Maritime Trade Operations (UKMTO), adding to concerns about energy supplies after Saudi Arabia shut down a vital oil pipeline on Saturday.
A Kyiv-Warsaw train was struck near the Polish border, Ukraine's state railway firm said on Sunday. No passengers were injured. Ukrainian Railways said that the country's railways were facing systematic attacks for a second day and warned of widespread delays.
Saudi Arabia has temporarily shut down its 1,200-kilometre East-West oil pipeline after it was hit by a drone attack, with Riyadh and Baghdad saying the strike originated from Iraq.
Dubai’s property market has spent years climbing. Now, for the first time since 2021, prices are moving in the opposite direction.
A Kyiv-Warsaw train was struck near the Polish border, Ukraine's state railway firm said on Sunday. No passengers were injured. Ukrainian Railways said that the country's railways were facing systematic attacks for a second day and warned of widespread delays.
Indonesian rescuers are searching for 130 people after a passenger ship carrying 243 people sank in the Java Sea following bad weather, while 113 people have been evacuated and six have died, the country’s search and rescue agency said on Sunday.
China will lead the creation of an open source platform among BRICS members to promote cooperation on large language models, Chinese President Xi Jinping said on Sunday.
Swedes vote in an election on Sunday (13 September) that could see the far-right enter government for the first time if the country's right-wing parties can form a majority.
Philippine rescuers recovered 41 more charred remains from a ferry fire on Saturday (12 September), taking the death toll to 76, while 13 people remained unaccounted for as forensic teams worked to identify the victims.
You can download the AnewZ application from Play Store and the App Store.
What is your opinion on this topic?
Leave the first comment