Recent energy price surges tied to Middle East conflicts have lifted euro area headline inflation to 3.8% in September 2026, well above the ECB’s 2% target and driven primarily by energy components. After the Governing Council’s 25-basis-point deposit rate hike to 2.50% in September, economist surveys show near-unanimous expectations for a hold at the late-October meeting followed by another 25-basis-point increase at the December 17 decision. Upward revisions to 2026 inflation and growth forecasts, alongside resilient economic data, have reinforced trader consensus around a single additional tightening step this year. Policymaker comments continue to highlight risks from volatile energy prices while noting more contained underlying pressures, supporting the current market distribution.