The European Central Bank is widely expected to raise interest rates on Thursday, but uncertainty around the U.S.-Iran war is clouding the outlook for its longer-term policy path, market watchers say.
Markets are pricing in a 100% chance of the ECB raising its key interest rate by at least 25 basis points, according to LSEG data.
ECB officials have said since the U.S.-Iran war broke out that they would take a meeting-by-meeting approach to monetary policy.
Its September meeting comes days after data showed inflation in the euro zone hit 3.3% in August, with energy inflation surging to 14.3%.
The euro zone, a net importer of energy, has seen inflation above the ECB's 2% target since the war in the Middle East threatened commodity transit through the Strait of Hormuz, causing oil prices to spike and remain volatile.