‘Conflict of attrition’ in Iran could keep inflation high, ECB policymaker warns - Financial Times

An ECB policymaker has warned that a prolonged "conflict of attrition" involving Iran could keep inflation elevated, according to a Financial Times report. The comment highlights a growing concern among central bankers that geopolitical tensions, rather than fading quickly, may become a persistent source of price pressure. Such conflicts typically disrupt supply chains, energy flows, and shipping routes, which can push up costs for businesses and consumers alike.

For markets, the warning underscores a key risk: inflation may not return to target as smoothly as hoped. If energy or transport costs remain high due to extended hostilities, the European Central Bank may need to keep interest rates restrictive for longer. This would affect bond yields, borrowing costs, and the euro’s exchange rate.

Investors should watch for further official commentary from ECB members, as well as inflation data and oil price movements. Any escalation, or de-escalation, in the Middle East could shift expectations for monetary policy quickly. At this stage, the warning is a reminder that geopolitics and price stability remain closely intertwined.