Prolonged conflict in Middle East risks slowing eurozone growth: ECB

European Central Bank policymakers warned Thursday that prolonged U.S.-Israeli military attacks on Iran could drive up inflation and slow eurozone growth.

ECB Vice-President Luis de Guindos told a Brussels finance summit that a drawn‑out conflict could disrupt energy supplies and unsettle investor confidence, threatening to derail the eurozone's fragile recovery.

Also on Thursday, Joachim Nagel, president of Germany's Bundesbank and an ECB governing council member, echoed the warning in his annual report presentation, stressing that sustained instability in the Middle East would keep energy prices elevated, driving inflation and weakening eurozone activity.

Several countries neighboring Iran reported being attacked in recent days amid heightened regional hostilities, as Iran launched retaliatory strikes following joint U.S.-Israeli operations on Tehran and other Iranian cities since Saturday.

Eurozone inflation rose to 1.9 percent in February, up from 1.7 percent in January, according to estimates of Eurostat, the statistical office of the European Union (EU). The rise in inflation comes as the fast-evolving conflict in the Middle East threatens to reignite a new energy shock for Europe, which has become increasingly reliant on liquefied natural gas (LNG).

Gas prices in the EU have surged by as much as 60 percent over the past few days, with futures breaking through 56 euros per megawatt hour to hit a three-year high on Wednesday, driven by the shutdown of an LNG facility in Qatar and shipment disruptions in the Strait of Hormuz.

The U.S. dollar weakened in late trading on Friday.

The dollar index, which measures the greenback against six major peers, dropped 0.34 percent to 98.982 at 15:00 (2000 GMT).

In late New York trading, the euro rose to 1.1606 dollars from 1.1583 dollars in the previous session, and the British pound added to 1.34 dollars from 1.3328 U.S. dollars in the previous session.

The U.S. dollar bought 157.74 Japanese yen, lower than 157.77 Japanese yen in the previous session. The U.S. dollar decreased to 0.777 Swiss francs from 0.7827 Swiss francs, and it declined to 1.3596 Canadian dollars from 1.3697 Canadian dollars. The U.S. dollar dropped to 9.1855 Swedish Kronor from 9.2657 Swedish Kronor.