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The European Central Bank kept borrowing costs on hold on Thursday but left room for more tightening in the coming months as a widening conflict in the Middle East pushed up energy prices again.
Analysts at ING said a surprise hike at Thursday's meeting “should not be fully ruled out.”
The ECB hiked its key deposit rate by 25 basis points in June as energy prices spiked. Investors had written off a hike at next week's meeting, but higher oil prices have brought monetary policy back into question.
The European Union plans to introduce a raft of policies and funding schemes to shift more of its economy to run on electricity, instead of oil and gas, a draft European Commission proposal seen by Reuters showed.
Threats of a resumed conflict and potential disruption in the Strait of Hormuz triggered a surge in global crude oil prices, with the benchmark Brent Crude Futures index surging above $79 a barrel, up from around $72 at the start of this week.
The DAX is singled out as the market most likely to see squeeze-driven gains in the weeks ahead Citi has warned that European stock markets face a growing risk of short squeezes, as investors caught betting against rising prices are forced to buy back their positions. The US bank said global equity positioning remained supportive of further gains, but that regional differences were becoming more pronounced.
The European Central Bank on Tuesday gave euro zone banks four months to draw up plans to counter AI-enabled cyber threats that could undermine confidence in the financial system and disrupt payments.
The euro zone's economy is not back to its state before the Iran war despite a drop in oil prices, as core inflation remains strong and price pressures continue, European Central Bank board member Isabel Schnabel said on Monday.