Renewed U.S.-Iran Clashes Again Cast Uncertainty Over Energy Markets. The ECB Is Bracing

The European Central Bank (ECB) will reassess its interest rate decision next week as a result of renewed clashes between the U.S. and Iran, Bundesbank President Joachim Nagel said.

"The renewed outbreak of military conflict in the Middle East and the fresh rise in oil prices underscore that the situation remains extremely volatile and the uncertainty is similarly high," Nagel told Reuters.

The ECB will hold its next monetary policy meeting next week. It hiked rates in its last meeting, taking it from 2% to 2.25%. Before, it had cut rates four times in the first half of 2025.

When raising the interest rate, the body also increased its inflation forecast. It now expects it to average 3% this year before dropping to 2.3% in 2027 and 2% the year after. The outlook has changed as a result of an expectation of higher energy prices.

At the same time, the body reduced its economic growth forecast, now expecting a 0.8% expansion for the year, 1.2% for 2027 and 1.5% for 2028.

The euro zone's annual inflation rate rose to 3.2% in May, marking another increase in consumer prices in the block.

Nagel had also said in late June that inflation was already at risk of staying above target even when the U.S. and Iran had reached a ceasefire. Back then, Nagel said the "energy price shock" is "still in the system" and urged for caution related to the talks between the countries.

Meanwhile, President Donald Trump held a meeting in the Situation Room to decide on the next course of action in Iran, according to a new report.

Axios detailed that Trump was joined by his top national security team, including Vice President JD Vance, Secretary of State Marco Rubio, Defense Secretary Pete Hegseth, Chairman of the Joint Chiefs Gen. Dan Caine and other senior officials.

The outlet went on to note that the meeting focused on new plans to strike strategic targets in the country if the escalation continues.

Speaking to Fox News' Trey Ingst before the meeting, Trump anticipated an escalation, saying "next week it gets really bad for them." "Next week comes the power plants, next week comes the bridges. We're going to knock out all of their power plants. We'll knock out all of their bridges unless they get to the table and negotiate," he said.

So far, most of the targets hit by the U.S. over the past days were air defenses and radar systems, as well as anti-ship missile positions and drone launch sites. Officials said the goal was degrading Iran's ability to target ships crossing through the Strait of Hormuz. Iran, in turn, continued to launch attacks against U.S. bases in Jordan, Kuwait and Bahrain.

The U.S. Central Command said on Wednesday that it conducted a new wave of strikes, "designed to further degrade military capabilities Iranian forces have used to attack commercial shipping" in the strait.