Oil Prices Rise on Hormuz Clashes, Clouding ECB Rate Path

Energy costs climbed for a fourth straight session as fighting resumed between the United States and Iran over the Strait of Hormuz, lifting Brent crude above $85 a barrel and West Texas Intermediate above $80. The moves added roughly 12 percent to benchmark prices since the prior Friday and revived concerns that sustained supply risks could push eurozone inflation higher just as the European Central Bank prepares its July 22 decision.

Brent futures gained 0.83 percent and WTI rose 0.89 percent in early European trading on Wednesday, according to market data cited by Oilprice.com. Traffic through the strait slowed sharply after Iran struck tankers and the United States responded with strikes on Iranian targets and reinstated a naval blockade. Iranian state media, quoted by Reuters, carried a statement from the Islamic Revolution Guards Corps warning that it would close “all other export corridors that benefit the US and its allies.” The same statement declared that “Regional energy exports are either shared by all, or denied to all.”

Analysts noted that Iran-aligned Houthis in Yemen could extend pressure by blocking the Bab el-Mandeb Strait if Saudi Arabia continues operations in Yemen, a route tied to Saudi crude exports from the Red Sea terminal at Yanbu. Those warnings appeared in Iranian media earlier in the week but have not been corroborated by independent reporting on Houthi intentions.

The price surge forced investors to reassess the ECB’s next move. Bundesbank President Joachim Nagel told Reuters that the situation remains “extremely volatile” and that policymakers should “react with caution, but to act decisively if necessary.” Austrian central bank chief Martin Kocher told Börsen-Zeitung that officials are watching for indirect price effects and second-round inflation risks. Eurozone headline inflation reached 3.2 percent in May before easing to 2.8 percent last month, while energy prices rose 8.7 percent year-on-year and core inflation stayed at 2.4 percent, according to Eurostat figures reported by CNBC.

The ECB cut rates four times in the first half of 2025, lowering the deposit rate from 3 percent to 2 percent, then raised it 25 basis points to 2.25 percent in June. Markets now assign roughly a 20 percent probability of another hike next week and still price two additional 25-basis-point increases by next spring. ING strategists noted that fresh inflation data due July 30 and 31 will arrive after the decision, leaving policymakers to weigh energy-driven upside risks against the risk of tipping a contracting economy into recession.