TEHRAN- The economic consequences of the ongoing U.S.-Israel conflict with Iran are spreading far beyond the West Asia, triggering inflationary pressures, weakening growth prospects, and forcing central banks to take defensive measures.

According to data and reporting published by CNBC, the European Central Bank (ECB) has raised its key interest rate by 0.25 percentage points to 2.25% in response to mounting inflation risks linked to the war.

The ECB said the conflict has significantly altered the economic outlook for the euro area, primarily through soaring energy costs caused by disruptions to global oil and gas supplies. The war, which has passed the 100-day mark, has contributed to a severe energy shock following damage to regional energy infrastructure and disruptions to shipping routes, including the strategically important Strait of Hormuz.

As a result, the ECB revised its inflation forecasts upward. The central bank now expects eurozone inflation to average 3% in 2026, well above its long-term target of 2%, before gradually easing in subsequent years. Higher energy prices are expected to ripple through the broader economy, increasing the cost of food, consumer goods, transportation, and services.

At the same time, the ECB lowered its economic growth projections, reflecting concerns that the conflict will continue to undermine consumer confidence, reduce real incomes, and disrupt commodity markets. Growth in the euro area is now forecast to reach only 0.8% in 2026, highlighting the growing economic strain facing European households and businesses.

ECB President Christine Lagarde warned that the outlook remains highly uncertain, with risks tilted toward higher inflation and weaker growth. She noted that the ultimate impact of the conflict will depend on the duration and severity of the energy price shock and its secondary effects across the economy.

According to CNBC, eurozone inflation rose to 3.2% in May, driven largely by rising energy costs, while economic growth in the first quarter was just 0.1%. Analysts view the ECB’s decision as a sign that policymakers are increasingly concerned about the inflationary consequences of the conflict. Economists at major financial institutions have suggested that further rate increases may follow if price pressures persist.

The developments underscore how the war is creating economic challenges far beyond the battlefield, threatening growth, raising living costs, and increasing financial uncertainty across Europe and the global economy.