Inflation rates in France and Spain have climbed to their highest levels since the start of 2024, providing further justification for the European Central Bank to raise interest rates. Data released on Friday showed that France's consumer price index increased by 2.8% year-on-year in May, slightly below market expectations, while Spain's index rose by 3.6% year-on-year, in line with forecasts. The surge in energy costs, driven by geopolitical tensions, contributed significantly to the price pressures.

A series of inflation data from major eurozone economies is set to be released, which will help ECB policymakers assess the extent to which Middle East conflicts are fueling inflation and whether a policy response is necessary. Over the past three months, since the U.S. military action against Iran, ECB officials—ranging from hawkish Executive Board member Isabel Schnabel to more dovish chief economist Philip Lane—have signaled that borrowing costs will likely need to be raised for the first time since 2023.