(Bloomberg) — Traders are fully pricing two interest-rate hikes from the European Central Bank this year, as an attack on Iranian energy assets revived fears of an inflation spike.
Euro swap markets indicate 50 basis points of monetary tightening in 2026, for the first time since March 9. The ECB’s next policy announcement is on Thursday, where both economists and money markets expect officials to hold the deposit rate steady at 2%, leaving the focus on their outlook for the rest of the year.
The latest repricing follows a spike in oil and European natural gas prices on Wednesday after Iran said US and Israeli airstrikes hit its giant South Pars gas field.
European government debt reversed an earlier rally, with the yield on two-year German notes up nine basis points at 2.47%, the highest since August 2024. The euro also erased a rise, falling 0.2% to $1.1512.
©2026 Bloomberg L.P.
