US-Iran Conflict Spikes Oil Prices and Threatens Eurozone Inflation

Global oil prices surged on Wednesday after Donald Trump announced plans to bomb Pickaxe Mountain, an Iranian underground nuclear facility. The escalation followed an 11th round of U.S. military strikes against Iran and reports that Iranian attacks had killed U.S. soldiers over the weekend. Secretary of State Marco Rubio indicated a breakdown in diplomacy, stating that Iran is "not serious about talks," effectively nullifying a memorandum of understanding signed last month between Washington and Tehran.

Brent crude jumped nearly 4% to $94.25 a barrel, while U.S. crude rose 3% to $87. Energy flows through the Strait of Hormuz have plummeted to near-zero, and the U.S. Strategic Petroleum Reserve has hit its lowest level since 1983 at 3.1 million barrels. HFI Research warned that Brent crude could reach $150 a barrel if supply bottlenecks persist.

The volatility has put the European Central Bank on alert ahead of its July rate-setting meeting. Policymakers fear that rising energy costs will trigger a resurgence of eurozone inflation after a June dip to 2.8 percent. While some economists expect a pause, others suggest the bank may raise interest rates further if oil prices continue to climb and push inflation above the two-percent target.