European Central Bank hikes rates for first time since 2023 as Middle East conflict fuels inflation

The European Central Bank raised interest rates for the first time since 2023 due to inflation fueled by Middle East conflict. This shift in monetary policy may slow eurozone growth while increasing borrowing costs. Furthermore, the ECB is preparing for a second rate hike amid geopolitical tensions. Such actions could strain liquidity and negatively impact risk assets, potentially shifting investor focus back toward fixed-income options as the region faces ongoing inflationary pressures and economic instability.