The European Central Bank announced a quarter-point rate hike on Thursday, bringing its key interest rate to 2.25% as the Iran war continues to blow inflation off target.

Markets had been pricing in a near-100% chance of the ECB raising rates by at least 25 basis points ahead of its June Governing Council meeting, according to LSEG data.

The ECB’s Governing Council said the decision had been made in a bid to ward off inflationary pressures generated by the U.S.-Iran war.

“The war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook for the euro area,” it said in a statement announcing the decision.

The central bank also raised its inflation forecasts, saying it now expects headline inflation in the euro zone to average 3% in 2026 before cooling to 2.3% next year and 2% in 2028.

It said the outlook had been altered in response to expectations of higher energy prices, which are expected to feed into the cost of food, goods and services.

Economic growth forecasts, meanwhile, were revised downward for this year and next year. The ECB now expects growth in the euro zone to average at 0.8% in 2026, 1.2% in 2027 and 1.5% in 2028.

Officials said the growth outlook had been trimmed to reflect “a more pronounced impact of the war on commodity markets, real incomes and confidence.”

Speaking to reporters on Thursday afternoon, ECB President Christine Lagarde reiterated that the war in the Middle East is generating inflation pressures.

“The outlook remains uncertain, with upside risks for inflation, and downside risks for economic growth. We are not pre-committing to a particular rate path,” she said.

“The full implications of the war for medium-term inflation and growth will depend on the intensity and duration of the energy price shock, as well as the scale of its indirect and second-round effects.”

The Iran war — which recently crossed the 100-day mark — has caused a global energy price shock, as the closure of the Strait of Hormuz waterway and destruction of energy production facilities in the Middle East have created severe supply constraints. A fragile ceasefire remains in place, but tensions have escalated between Washington and Tehran in recent days.

The ECB said Thursday that its Governing Council “remains well positioned to navigate the uncertainty caused by the war,” and will closely monitor the situation — but it stressed that officials are “not pre-committing to a particular rate path.”

Euro zone inflation rose to 3.2% in May, flash data showed earlier this month, as higher energy costs drove the region’s inflation rate further above the ECB’s 2% target.

The euro zone economy grew by just 0.1% in the first…

Travelers to Europe may be leaving money on the table when they buy goods there.

I learned this during a recent trip to Italy. My girlfriend, who bought a pair of shoes in Venice, was able to claim a refund on the value-added tax she paid on the purchase.

She ultimately got back 17 euros (US$20) on a total purchase of 155 euros (US$181).

Refunds of value-added tax, known as VAT, can be worth a “chunk of money” for U.S. travelers to Europe, depending on what they buy and in which country they purchase the item, said Sofia Markovich, a travel advisor and founder of Sofia’s Travel.

Getting a few extra dollars back after a European vacation may help somewhat defray the higher cost of airfare resulting from the Iran war, and a euro-U.S. dollar exchange rate that has become less favorable in recent years.

However, we would have missed out had the Italian shopkeeper not asked whether we wanted the paperwork necessary to claim the refund later, which we did with relative ease at an airport kiosk in Rome.

Many times, stores don’t flag the option for customers, experts said.

“You have to remember to get [the paperwork] in the shop, because not every shop will remind you of it,” Markovich said. “You personally have to be proactive about it.”

For some, the additional hassle — which generally includes an extra stop at the airport — may not be worth it for lower-value items, said Sally French, a travel expert at NerdWallet.

“It’s a nice-to-have, but I’m not getting to the airport early to save $10,” she said.

Value-added taxes are a tax on domestic consumption, like retail sales taxes charged by U.S. state and local governments.

VATs are the most common type of consumption tax in the world, used by more than 170 countries worldwide.

European nations levy a range of VAT rates, which can also vary by product.

Standard VAT rates range from 8.1% in Switzerland to 27% in Hungary, according to the Tax Foundation.

Spain, for example, has a standard VAT rate of 21% but carries a lower rate for certain items, like 10% for sunglasses and 4% for books and magazines, according to Global Blue, a payments company that helps facilitate VAT refunds.

However, not all purchases qualify for a refund, experts said.

For one, refunds are generally only meant for merchandise, and not for certain categories like hotels and meals, experts said.

Many countries also impose a minimum value on purchases to be eligible.

“Typically, you must ring up the minimum at a single retailer — you can’t add up purchases from various shops to reach the required amount — so if you’re doing a lot of shopping, you’ll benefit from finding one spot where you can buy big,” Rick Steves, a travel…

European stocks soared on Wednesday as traders responded to reports that the U.S. and Iran are close to an agreement that will bring an end to the war.

The pan-European Stoxx 600 index closed 2.3% higher. London’s FTSE 100 finished 2.2% higher, bouncing back from heavy losses on Tuesday, while France’s Cac 40 and Germany’s Dax added 2.9% and 2.2%, respectively.

All major bourses and sectors, except oil and gas stocks, finished Wednesday’ session in the green. The euro rose 0.5% against the dollar to 1.1751.

Two U.S. officials and two other sources briefed on the issue told Axios that the White House believes it is nearing a one-page, 14-point memorandum of understanding to end the war and establish a framework for more detailed nuclear talks.

A spokesperson for Iran’s foreign ministry told CNBC that Tehran is “evaluating” a 14-article peace proposal from the U.S. administration.

Wednesday’s breakthrough followed President Donald Trump’s prior announcement pausing “Project Freedom,” the U.S. plan to “guide” ships through the Strait of Hormuz. In a Truth Social post, he cited “the fact that Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran,” as a driver behind the decision.

Iran’s foreign minister Abbas Araghchi met Chinese foreign minister Wang Yi in Beijing on Tuesday, according to state media. China has been called upon by Trump’s advisors to pressure Iran into re-opening the Strait of Hormuz, the vital shipping route for oil and gas. 

Overnight, South Korea’s Kospi index advanced 6.5% to scale a new peak, topping 7,000 as it builds on gains of more than 70% this year so far. 

Index heavyweight Samsung Electronics reached a record high, rising over 14% to exceed $1 trillion in market capitalization. SK Hynix also reached an all-time high, gaining more than 10%. 

Novo Nordisk hiked annual profit guidance on Wednesday, as the pharmaceutical group revealed its blockbuster weight-loss drugs performed better than expected in the first three months of the year.

The results covered sales of Novo’s oral weight loss drug, the Wegovy pill, in the U.S. sales of the pill amounted to 2.26 billion kroner, well above analyst estimates compiled by Reuters of 1.16 billion kroner. Novo’s shares closed roughly 2% higher.

Pandora shares finished up by about 15% after first-quarter sales beat analyst expectations, despite weak consumer sentiment in the U.S. weighing on results.

The Danish jeweler has been under pressure from the Trump administration’s import tariffs and a surge in the price of silver, weighing on margins. It announced on Wednesday it would be applying for tariff reimbursement under the International Emergency Economic Powers Act in the U.S.

— CNBC’s Justina Lee also contributed to this report.

U.S. President Donald Trump said the U.S. will hit Iran “extremely hard” over the next two or three weeks in a national address on Wednesday.

“We’re going to hit them extremely hard over the next two to three weeks,” he said. “We’re going to bring them back to the stone ages, where they belong.”

But the first targets to bear the brunt of the president’s “Epic Fury,” Washington’s name for the Iran operation, were Asian stocks, U.S. Treasuries and oil prices.

Shortly after his 19-minute speech, Asian markets reversed earlier gains from Thursday’s session, as benchmarks in Australia, Japan and South Korea fell. South Korea’s Kospi plunged 4.37%, leading losses in the region.

The Hong Kong and mainland Chinese markets, which opened their sessions shortly after his speech, started the day in negative territory.

U.S. stock futures were down over 1% for all three major indexes after trading flat earlier in the session.

U.S. Treasury yields climbed after Trump’s speech, signaling a sell-off in the bond market, with the yield on the benchmark 10-year notes climbing 6 basis points to 4.38%.

In currencies, the U.S. dollar index rose 0.37% to 100.02, reversing earlier losses.

The Japanese yen weakened 0.38% to 159.37 against the greenback, while the South Korean won fell 0.6% to 1,521.80. Both currencies had strengthened earlier in the session.

The dollar also strengthened against other major currencies, with the Euro trading at 1.153, while the pound fell 0.57% to 1.32 against the U.S. dollar.

Spot gold prices slipped 1.82% to 4,671,67.

Oil prices saw the largest swings after Trump’s speech, with Brent crude futures jumping 5.37% to $106.59 a barrel while U.S. West Texas Intermediate rose 4.51% to $104.64.

Despite Trump’s claim that the U.S. has almost met all its objectives, analysts said his threat to hit Iran “extremely hard” could still send oil prices higher.

“Trump is declaring mission almost accomplished, but highlighting further escalation in the next few weeks, which increases the risk of more extensive damage to regional energy infrastructure both in Iran but throughout the Gulf, ” Rachel Ziemba, founder of Ziemba Insights, told CNBC’s “The China Connection.”

Early Wednesday stateside, Trump claimed that Iran’s “New Regime President” had asked the U.S. for a ceasefire, a claim that Tehran has denied.

Trump added that the U.S. will “consider” the request only once the Strait of Hormuz is “open, free, and clear,” he said on Truth Social, fueling expectations that the war could drag on longer.

“Remember — the…

The European Central Bank on Thursday kept policy rates unchanged for the fifth consecutive meeting, with its key interest rate at 2%, in line with the bank’s target.

The ECB commented Thursday that the inflation trajectory and wider economic conditions did not warrant a move at this month’s meeting, but warned that the outlook was unpredictable.

“Inflation should stabilise at its 2% target in the medium term. The economy remains resilient in a challenging global environment. Low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure and the supportive effects of the past interest rate cuts are underpinning growth,” the central bank stated.

“At the same time, the outlook is still uncertain, owing particularly to ongoing global trade policy uncertainty and geopolitical tensions,” it added. The euro was flat against the dollar, at $1.179, following the decision, which had been widely anticipated.

ECB President Christine Lagarde said at a press conference Thursday that the central bank would maintain its data-dependent and “meeting-by-meeting approach,” and would not be “pre-committing to a particular rate path.”

“In particular, our interest rate decisions will be based on our assessment of the inflation outlook and the risks surrounding it,” she said.

At first glance, Thursday’s decision looks like a non-event. Economists say it’s not.

“It would be wrong to characterize the February meeting as a non-event. The environment is marked by high uncertainty and two-sided risks,” Deutsche Bank economists said in emailed research ahead of the rate hold.

“Understanding how the ECB is thinking about risks is important to gauging the path of policy going forward,” they added, assessing what the rising euro exchange rate means for monetary policy when the euro zone’s inflation rate is already below the ECB’s 2% target, with flash data on Wednesday showing the rate had cooled to 1.7% in January.

“All else unchanged, the recent appreciation [of the euro] is disinflationary and reinforces the expected inflation undershoot. However, the scale of the impact depends on the circumstances.”

Currency appreciation tends to cause disinflation by making imported goods, raw materials, and energy cheaper, in turn lowering production costs and consumer prices. 

While that may be good for businesses and consumers in the short term, central banks are wary about disinflation, and potentially deflation, over the longer-term because it can trigger economic stagnation with consumers holding off purchases (in the expectation that prices will fall further) while businesses can see lower revenues and increased real debt burdens.

Over the past month, the euro has strengthened 0.75% against the dollar,…