The guns may have gone quiet, but the price tags haven’t. Martin Kocher, a member of the ECB Governing Council, is warning that eurozone inflation will remain stubbornly high for an extended period, even after the US-Iran ceasefire reopened the Strait of Hormuz and sent oil prices tumbling.

The numbers behind the warning

Eurozone inflation hit 3.2% in May 2026. That’s well above the ECB’s 2% target, driven primarily by Middle Eastern supply disruptions that sent energy costs soaring during the Iran conflict.

In response, the ECB raised its deposit rate by 0.25 percentage points to 2.25% on June 15, 2026. That marked the central bank’s first rate hike in nearly three years, a clear signal that Frankfurt views the inflationary threat as serious enough to reverse course on what had been a prolonged easing cycle.

Kocher first sounded the alarm back on May 22-23, warning that inflation would exceed previous forecasts thanks to rising energy prices fueled by the escalating Iran situation. At the time, the ECB was openly weighing a rate hike contingent on whether a sustainable peace deal materialized.

A ceasefire did arrive on June 15, reopening the Strait of Hormuz and bringing some relief to global energy markets. Oil prices fell. Kocher, alongside fellow ECB officials Philip Lane and Joachim Nagel, has made clear that the damage is already baked into the system, with secondary effects — higher transport costs, renegotiated supplier contracts, elevated wage demands — still working their way through the eurozone economy.

Why pipeline inflation is so tricky

When energy prices spike, businesses don’t absorb the cost out of goodwill. They pass it along. A factory pays more for electricity, so it charges more for widgets. The widget buyer raises prices on finished goods. The retailer marks up the shelf price. By the time the consumer reaches for their wallet, the original oil spike has been multiplied across several layers of the economy.

The 3.2% inflation reading in May captured the initial energy shock. The ECB’s concern is that readings in the coming months could remain elevated even as headline energy costs moderate, because all those downstream price adjustments are still propagating.

Europe experienced something similar during the 2022 energy crisis triggered by the Russia-Ukraine conflict, when inflation peaked above 10% and took well over a year to meaningfully decline even after natural gas prices normalized.

What this means for investors

The ECB’s pivot back to rate hikes changes the calculus for virtually every asset class. Higher interest rates mean higher borrowing costs, which tend to slow economic growth, compress corporate margins, and reduce the appeal of speculative investments.

The 2.25% deposit rate itself isn’t punishing by historical standards. But if inflation remains above target for the next several quarters, as Kocher’s comments strongly suggest, the ECB may have no choice but to continue hiking.

The ceasefire was genuinely good news for global stability and energy prices. But Kocher and his ECB colleagues are pointing to persistent cost pressures, wages catching up to past inflation, and businesses reluctant to lower prices as dynamics that don’t resolve simply because a geopolitical crisis cools down.