By George Glover

Just when central bankers thought they had finally overcome stubborn inflation, the war in Iran sparked an oil rally that means policymakers are once again fretting about price pressures.

In a week when the Reserve Bank of Australia hiked but the Federal Reserve held, central banks around the world are following the Fed's lead.

The European Central Bank said on Thursday that it would keep interest rates at 2%, the sixth meeting in a row it has held them steady.

The Bank of England also maintained rates at 3.75% on Thursday. The Bank of Japan, Sweden's Riksbank, and the Swiss National Bank also kept borrowing costs unchanged.

The ECB spent much of the past year telling investors it was in a " good place" on monetary policy, but that was before war broke out in the Middle East.

Euro zone inflation climbed to 1.9% in February, up from 1.7% the previous month. That figure covers the period before Israel and the U.S. first attacked Iran on Feb. 28, triggering a sharp surge in oil and natural-gas prices.

"Policymakers are no longer 'in a good place' and face a difficult communication challenge at tomorrow's meeting," Pantheon Macroeconomics' chief euro zone economist Claus Vistesen said.

Vistesen added that the ECB could "plausibly" hike interest rates by a quarter of a point in June and July, and described the April policy decision as "a live meeting."

Europe's flagship Stoxx 600 index is down 7.6% since the Iran war started, compared with a 3.7% drop for the S&P 500. Europe is more exposed than the U.S. to the conflict because of its reliance on oil and natural gas imports from the Middle East.

Write to George Glover at george.glover@dowjones.com

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March 19, 2026 09:15 ET (13:15 GMT)

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