The bombs may have stopped, but the inflation hasn’t. That’s the core message from Isabel Schnabel, one of the most influential voices on the European Central Bank’s executive board, who is pushing back against the narrative that the US-Iran peace deal will automatically cool prices across the eurozone.
On June 25, Schnabel made clear that despite improved oil prices following the memorandum of understanding between Washington and Tehran, the ECB needs to keep raising interest rates. The conflict’s inflationary damage, she argued, is already baked into the system, and it’s not going away just because tankers can sail through the Strait of Hormuz again.
The peace deal doesn’t fix broken pipelines
Schnabel first laid out this argument on May 26, when she stated the ECB should raise rates in June due to sustained damage to energy infrastructure and supply chains.
The US-Iran memorandum of understanding, signed around June 15-17, was designed to end military operations and reopen the Strait of Hormuz, one of the world’s most critical maritime chokepoints for oil transport. Schnabel’s June 25 remarks emphasized that further tightening is warranted because the conflict’s impacts are too widespread and lasting to simply wave away with a ceasefire agreement.
