ECB RATE RISK RISES AS ENERGY SHOCK HITS MARKETS

European Central Bank accounts released Thursday show that the decision to hold interest rates in April was a close call for some policymakers, as inflation pressure from the energy shock continued to build. Reuters reported that some ECB officials pushed for a rate hike but agreed to wait for clearer evidence that higher energy prices were spreading through the broader economy. Markets now expect the first hike as soon as June or July, with more tightening possible later this year.

ECB Chief Economist Philip Lane also warned that the energy shock could have a persistent impact on inflation, even if Middle East fighting resolves faster than expected. Reuters reported that Lane said countries may refill reserves and diversify energy sources, keeping costs elevated, while central banks must prevent households and firms from treating higher inflation as permanent.

Markets are already reacting. Reuters reported Thursday that global stocks pulled back from record highs as Gulf tensions lifted oil prices, with Brent up 2.7% to about $96.80, European shares weaker, U.S. futures lower, and bond yields rising as investors priced in renewed inflation risk. The move shows how quickly energy security now feeds into rate expectations, currencies, equities, and government borrowing costs.

The market story is not simply "oil went up." It is that central banks may have to respond if energy prices keep bleeding into consumer prices, wage demands, and business pricing plans. For Europe, the ECB is trying to avoid both mistakes at once: tightening too hard into weak growth, or waiting too long while inflation expectations drift upward.