Just weeks ago, the European Central Bank was in firefighting mode. A Middle Eastern conflict involving Iran had choked oil supplies through the Strait of Hormuz, crude prices surged past $93 a barrel, and eurozone inflation spiked to 3.2% in May. The ECB responded with a 25-basis-point rate hike in June, bumping its deposit rate from 2% to 2.25%.
Now, the fire seems to be putting itself out. Brent and WTI crude have cratered to the $58-61 range by late June 2026, their lowest levels in four years. That’s not just below where they were when the ECB pulled the trigger on its hike. It’s below the bank’s own “milder” scenario projections, which had assumed oil averaging $112 per barrel for Q2 2026.
Markets are already repricing the ECB’s next move
The ECB’s next policy meeting is scheduled for July 23, and traders have taken notice of the shifting landscape. Markets are now pricing in only about a 33% chance of another rate hike at that meeting. The consensus is shifting toward September or later for any additional tightening.
The gap between the ECB’s staff projections and reality is worth pausing on. Their models assumed oil at $112. It’s trading closer to $60. The ECB built its rate hike rationale on a foundation that no longer exists.
