Nomura analysts note that markets currently price around three rate hikes for the European Central Bank (ECB) by December 2026, implying a similar response to the Iran war energy shock as the Bank of England (BoE). However, they highlight fundamental differences versus 2022 and between the Euro area and UK, and its baseline keeps ECB policy rates unchanged through Q4 2027.

Energy shock and conditional ECB hikes

"Markets currently price around three rate hikes for the ECB and BoE by December 2026, which shows market participants expect both central banks to respond almost identically to the energy shock from the Iran war."

"There are fundamental differences between the energy shock from the Iran war and the 2022 European energy crisis."

"In our baseline scenario, we forecast unchanged policy rates by both the ECB and BoE through Q4 2027."

"However, we believe that, if the spot price of Brent crude oil were to remain in the USD95-100/bbl range by the ECB’s June meeting, the ECB would raise rates by 25bp in June and then again in September."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)