Brent crude oil prices have surged from approximately $70 to $118 per barrel, contributing to a rise in euro area inflation to 3.2% as of May 2026, significantly exceeding the ECB’s target of 2%. This inflationary pressure prompted the ECB to increase its deposit rate to 2.25% in June 2026. The conflict, initiated by coordinated Israel-US strikes on Iran, has led to market concerns over potential supply disruptions, particularly through the Strait of Hormuz. The ECB’s analysis characterized the oil price response as ‘surprisingly restrained,’ indicating heightened apprehension among policymakers. Projections for Q3 2026 suggest oil prices could range from $88 to $166 per barrel, with implications for economic stability. A lower price may allow for a pause in rate hikes, while a higher price could lead to stagflation, necessitating further policy intervention.