ECB's Rehn sees prolonged Middle East conflict keeping eurozone inflation elevated

September 1, 2026 at 11:59 AM1 min

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ECB Governing Council member Olli Rehn said the central bank must prepare for a prolonged Middle East conflict that could keep eurozone inflation elevated. He cited high energy prices and shipping disruptions through the Strait of Hormuz as key pressures. Markets price a more than 95% chance of a 0.25 percentage point deposit rate hike to 2.5% at the September 10 meeting.

Key Facts

Olli Rehn, ECB Governing Council member and Bank of Finland governor, said the ECB must prepare for a prolonged Middle East conflict that could keep eurozone inflation elevated.
Rehn cited high energy prices and shipping disruptions through the Strait of Hormuz as the main sources of inflationary pressure.
Investors price a more than 95% probability of a 0.25 percentage point ECB deposit rate hike to 2.5% at the September 10 meeting.
Eurozone inflation was expected to accelerate to 3.3% in August from 2.9% in July, well above the ECB's 2% target.

Inflationary Pressures

Rehn identified high energy prices as the primary driver of inflation in the eurozone. Shipping disruptions through the Strait of Hormuz, a key route for global oil and gas supplies, are exacerbating the situation. Eurozone inflation was expected to reach 3.3% in August, up from 2.9% in July, exceeding the ECB's 2% target. Inflation has remained above the ECB's target since March.

Policy Outlook

Rehn warned against expecting a quick end to the Middle East conflict, suggesting it could become a war of attrition due to incompatible goals. Markets anticipate further monetary tightening in the eurozone. Investors assign a more than 95% probability to a 0.25 percentage point increase in the ECB deposit rate to 2.5% at the September 10 meeting.