The European Central Bank (ECB) raised its benchmark interest rate to 2.25% on Thursday, marking the first hike since 2023. According to the International Business Times, the move was prompted by pressures from the war in Iran. Daily Sabah reported that the ECB became the first major central bank to hike rates in response to the conflict as policymakers attempt to address inflation fueled by sharply higher oil prices. The rate increase follows a period where the benchmark had remained at 2% for a year. Daily Sabah noted that oil prices rose sharply after Iran choked off crude oil flow through the Strait of Hormuz. The outlet reported that international benchmark Brent crude traded just below $92 per barrel on Thursday, up from approximately $73 before the war. The ECB’s action aims to dampen consumer price inflation caused by higher costs for products like gasoline, diesel, and heating oil. Following the hike, the ECB raised its inflation forecast to an average of 3% for this year, with projections of 2.3% in 2027 and 2% in 2028. The International Business Times reported that the bank also reduced its economic growth forecast to 0.8% for the current year. Analysts cited by Daily Sabah suggested the hike might be a “one-and-done” moment intended to signal market determination, while Carsten Brzeski of ING bank suggested the ECB might only need one or two increases because consumers may be unwilling to pay higher prices. The International Business Times reported that markets widely expected the move, describing the decision as strong across various scenarios. The outlet also noted that a recent Reuters poll showed economists no longer expect the U.S. Federal Reserve to cut rates this year, while interest rate futures are pricing in a hike by year-end.