The European Central Bank (ECB) has increased interest rates in the Eurozone to 2.25%, marking the first rise in nearly three years. This modest increase of 0.25% aims to combat rising inflation, primarily driven by elevated gas and oil prices. The situation is exacerbated by disruptions in the Strait of Hormuz, which has been largely closed for over 100 days, limiting global oil supply. While the ECB previously held rates steady following the onset of conflict in the Middle East, inflation has climbed from 1.9% in early 2024 to 3.2% in May, exceeding the ECB’s target of around 2%. The ECB now forecasts an average inflation rate of 3% for 2026. Higher interest rates are intended to slow economic activity by increasing borrowing costs for businesses, ultimately curbing price increases. This decision follows a period of rate hikes initiated in 2022 in response to energy price surges linked to the war in Ukraine, though current economic conditions differ from that earlier period.