ECB's Rehn warns that conflict of attrition in Iran could keep inflation high, according to FT

Governing Council commentary linking a protracted Middle East conflict to persistent inflation follows the established energy-supply-shock template: an attritional conflict affecting Gulf supply routes feeds inflation through crude, freight and insurance costs rather than through demand, and central banks have historically treated that as a harder trade-off than a demand-driven overshoot because tightening into a supply shock risks amplifying the growth hit. The distinction that matters for the rates curve is whether the concern is about the headline impulse, which monetary policy tends to look through, or about second-round effects in wages and expectations, which is what has historically forced a hawkish repricing of the path. Remarks framed as a warning rather than a commitment leave the deposit facility priced on incoming data; in past episodes of geopolitical energy risk, front-end repricing has tracked the oil curve more closely than any single official's language. Rehn has sat toward the less hawkish end of the Council spectrum, so inflation caution from that quarter carries somewhat more signalling weight than the same line from a known hawk, a pattern markets have tended to respect. The follow-ons are whether other Council members echo the framing, how it sits against the staff projections at the next meeting, and the crude and gas price trajectory itself. As commentary rather than a decision, the signal is directional only.