FRANKFURT, Germany (AP) — The European Central Bank left interest rates unchanged Thursday amid uncertainty about how volatile energy prices will affect inflation.
The central bank for the 21 countries that use the euro currency left its benchmark rate unchanged at 2.25% following a quarter-point hike at its previous meeting June 11. That increase was aimed at dampening the impact on consumer prices from higher oil prices due to the US-Iran war and subsequent interruption of oil shipments through the Strait of Hormuz.
Analysts say the bank may simply be taking a pause to gather more information amid swings in oil prices, which fell after announcement of a ceasefire but then rose again when the ceasefire agreement collapsed and fighting resumed. Economists are pointing toward the bank's Sept. 10 meeting as a possibility for another rate increase.
“Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out," ECB President Christine Lagarde said at a post-decision news conference. "We are therefore closely monitoring the intensity and duration of the shock, as well as its indirect and second round effects...the longer energy prices stay high, the more likely they are to drive up broader inflation.”
Lagarde said the bank is making decisions meeting by meeting based on incoming data and has not committed to any particular path for rates.
Lagarde also faced a question about whether she would commit to serving out her full, eight-year term which ends in October 2027.
Asked for a “yes or no” response, she said: “You know, I hate to be boxed in in any particular circumstances."
She added that “you are not going to see the back of me before 2027” and that “when there clouds on the horizon, the captain stays on the ship, and this captain is staying on this ship as long as there are clouds on the horizon.”
Rate hikes combat inflation by raising the cost of credit for buying things, from new houses to new factories. That cools demand for goods and eases pressure on prices. Inflation in the eurozone ran at an annual 2.8% in June, down from 3.2% in May.
International benchmark Brent crude rose to $100 Thursday, the first time in two months, after Yemen’s Iran-backed Houthi rebels said they attacked two Saudi oil tankers in the Red Sea, potentially widening the conflict in and around Iran.
Brent spiked 7% after Iranian-backed Houthis launched the attacks near the Bab al-Mandeb Strait, raising doubts about Saudi Arabia’s ability to ship oil through the Red Sea instead of the Strait of Hormuz.
Two men wade in the waters of the Strait of Hormuz with vessels anchored in the background, off Bandar Abbas, Iran, Sunday, July 12, 2026. (Razieh Poudat/ISNA via AP)
Houthi supporters shout slogans as they demonstrate against airstrikes on Sanaa International Airport in Sanaa, Yemen, Monday, July 13, 2026. (AP Photo/Osamah Abdulrahman)
NEW YORK (AP) — Oil prices are jumping again Thursday as increased fighting in the Middle East threatens to slow the global flow of crude. Wall Street, meanwhile, is sinking following sharp drops for two of its most influential stocks, Alphabet and Tesla.
The S&P 500 dropped 1% and may be heading for its first back-to-back weekly loss since March. The Dow Jones Industrial Average was down 516 points, or 1%, as of 10 a.m. Eastern time, and the Nasdaq composite was 1.8% lower.
Stocks sank under the pressure of rising oil prices, which raise costs for many businesses and limit their customers’ ability to spend. The price for a barrel of Brent crude oil, the international standard, climbed 6.7% to $100.40.
Earlier in the morning, it touched its highest price in two months following attacks on two Saudi oil tankers in the Red Sea. The attacks threaten another avenue that oil companies can use to transport their crude from the Middle East to customers worldwide, along with the Strait of Hormuz.
Underscoring the importance of the sea route for the economy, U.S. President Donald Trump threatened “major military punishment” against the Houthi rebels in Yemen, who are backed by Iran, if they keep attacking ships.
It was just a few weeks ago that Brent had dropped below $72 per barrel, roughly back to where it was before the United States and Iran attacked Iran to begin their war, on hopes that the Strait of Hormuz would fully reopen to oil tankers.
The jumps in oil prices are threatening to reaccelerate inflation. That in turn could push the Federal Reserve and other central banks to raise interest rates, which would slow economies and undercut prices for stocks and other investments.
The European Central Bank held interest rates steady at its meeting Thursday. But traders are banking on a nearly 36% chance the Fed will hike rates at its meeting next week. That's up from less than the 12% probability seen a week ago, according to data from CME Group
That helped push the yield on the 10-year Treasury up to 4.70% from 4.67% late Wednesday and from just 3.97% before the war with Iran began. That’s a significant increase, and it’s already helped bring long-term U.S. mortgage rates to their highest levels in nearly a year.
Stocks of companies with big fuel bills fell to sharp losses on worries about higher expenses.
American Airlines lost 8.6% even though it reported a much bigger profit for the spring than analysts expected, something that usually sends a stock’s price higher. It raised airfares, which helped it offset its higher fuel prices, during the latest quarter.
Southwest Airlines gave back 4.7%, even though it also reported better profit and revenue than analysts expected. It wrung more profit out of each $1 of its revenue during the spring, even with higher fuel prices.
One of the heaviest weights on the U.S. stock market was Tesla, which sank 12.6% after Elon Musk’s electric-vehicle company reported a weaker profit for the latest quarter than analysts expected. Because it’s one of the largest stocks in the S&P 500 by market value, its stock has more influence on the index than nearly every other.
One of the few that’s larger is Alphabet, and its stock fell 6.2% even though the parent company of Google delivered stronger profit and revenue than analysts expected.
Investors seemed to be focusing instead on how much more Alphabet said it’s set to spend on artificial-intelligence investments. CEO Sundar Pichai said AI demand helped its cloud revenue growth accelerate to 82% last quarter, but unease nevertheless remains about whether all the billions of dollars Alphabet is pouring into the technology will pay off in terms of productivity and profits.
Such worries have been shaking the AI industry broadly in recent weeks, leading to big swings for the overall stock market.
In stock markets abroad, indexes fell sharply in Europe as oil prices jumped. France’s CAC 40 dropped 1.5% for one of the larger losses.
Indexes earlier in the day were stronger in Asia, where South Korea’s Kospi jumped 4.4%.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this report.
The screen showing the Korea Composite Stock Price Index (KOSPI) is displayed at a dealing room of Hana Bank in Seoul, South Korea, Wednesday, July 15, 2026. (AP Photo/Lee Jin-man)
A man walks in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, July 15, 2026, in Tokyo. (AP Photo/Eugene Hoshiko)
People walk in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, July 15, 2026, in Tokyo. (AP Photo/Eugene Hoshiko)
