Published by Global Banking & Finance Review®
Posted on March 9, 2026
4 min readLast updated: April 1, 2026
Add as preferred source on GoogleMarkets sharply repriced rate‑hike expectations for ECB, SNB and Riksbank as oil surged above $110‑120 amid the Iran war, reviving inflation fears and the spectre of supply‑driven second‑round effects.
By Francesco Canepa and Balazs Koranyi
FRANKFURT, March 9 (Reuters) - Central banks across Europe came under market pressure on Monday to lift interest rates as the war in Iran drove up energy costs and revived the spectre of another inflation wave.
Money markets ramped up bets on rate increases by the European Central Bank, the Swiss National Bank and Sweden's Riksbank before year-end, with the Bank of England seen following suit in 2027.
Asian central banks were also seen shelving plans to cut or even consider hikes.
The unusually sharp repricing came as major oil producers cut supply and fears grew of prolonged shipping disruptions, pushing crude above $119 a barrel — its highest level since mid‑2022.
For many policymakers, the surge risked reopening an old wound. Most European central banks were late to raise rates four years ago when Russia's invasion of Ukraine unleashed an energy shock that quickly spilled over into broader consumer prices.
"That's a trauma that is very much alive among some central bankers, so we cannot ignore that," said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. "They will be worried about another supply shock with the potential ... to have spillovers to the rest of the supply chain."
The ECB was seen raising rates once by June or July and most likely again by December, money-markets data showed. The Riksbank was seen hiking once or twice in the autumn.
The SNB was expected to move in October and once more in 2027 when the BoE was also seen joining the tightening cycle.
All four banks next meet on March 18 and 19, with no immediate action expected.
Officials, especially at the ECB, have stressed that a temporary rise in oil triggered by the Iran conflict should not materially alter the medium‑term inflation outlook, nor require a policy response.
But a sustained jump could. TS Lombard analysis indicates euro zone inflation would rise by roughly one percentage point, with Britain only slightly behind, if oil and gas prices remain at current levels.
Higher fuel prices would also echo through the economy, lifting transport and manufacturing costs much as they did in 2022.
"In 2022, the ECB waited too long, because it was coming off a decade of deflation," said Marco Brancolini, head of euro rates strategy at Nomura. "Now the (ECB's) Governing Council will be much less patient as it will want to avoid a repeat of 2022."
The core dilemma is whether to stick to the textbook, which argues that central banks should look past temporary supply shocks, or instead defer to recent painful experience.
"The ECB's long-standing principle has been to 'look through' external energy supply shocks, because the initial price shock is inevitable and possibly transitory and monetary policy tightening would only make the resulting output loss worse," Reinhard Cluse, an economist at UBS, said.
"However, with the latest energy price moves and the risk of second-round effects, we acknowledge the risk that the ECB might have to bring the first hike forward," he added.
Still, several economists cautioned that markets may be getting ahead of themselves.
Pictet’s Ducrozet said the Swiss National Bank was least likely to raise rates given the strengthening franc, a typical safe‑haven play.
And Alberto Gallo, chief investment officer at Andromeda Capital Management, said the shift in pricing reflected a rapid unwinding of earlier bets on rate cuts — a view echoed by Nomura’s Brancolini.
"Market pricing is driven by the capitulation of crowded positions on the curve as well as risk-off hedges," Brancolini said.
(Additional reporting by David Milliken in London and Simon Johnson in Stockholm; Eiting by Joe Bavier)
Central banks face pressure to raise rates as the Iran conflict drives up energy prices, sparking concerns about renewed inflation.
The European Central Bank, Swiss National Bank, and Sweden's Riksbank are seen hiking rates this year, with the Bank of England expected to follow in 2027.
The conflict has driven oil prices above $119 a barrel, raising fears of higher energy costs and inflation similar to the post-Ukraine war period.
Central bankers must decide whether to look past temporary supply shocks or act quickly due to recent painful experiences with inflation.
If oil and gas prices remain high, euro zone inflation could rise by about one percentage point and have broader economic effects.
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