Quick overview

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Through a member of its Governing Council, the institution confirmed that energy pressures stemming from the war could lead to a more restrictive stance.

The conflict in the Middle East continues to ripple through the global economy. Yannis Stournaras, a member of the Governing Council of the European Central Bank and governor of the Bank of Greece, said Monday that the appropriate monetary policy for the euro area will depend on the scale and nature of energy supply disruptions caused by the war involving the United States, Iran and Israel.

Speaking at the annual shareholders’ meeting of the Bank of Greece in Athens, Stournaras noted that if the surge in energy prices proves temporary, the need for monetary tightening would likely remain limited.

However, he added that a more restrictive policy stance could become necessary if higher energy prices prove stronger and more persistent, particularly if they begin to affect medium-term inflation expectations and wage dynamics across the euro area.

Signs the war could be nearing an end?

For more than a week, Donald Trump has delivered mixed messages about the conflict. At times, he has suggested that negotiations with Tehran are advancing toward a ceasefire, while at other moments he has hinted at further military action in response to the closure of the Strait of Hormuz.

The U.S. president has recently intensified pressure on Iran, issuing an ultimatum demanding that the strategic waterway be reopened before Tuesday. Tehran has rejected the demand, raising the prospect of new attacks and additional measures targeting energy resources.