The escalating US-Iran conflict is exerting upward pressure on inflation within the Eurozone, prompting ECB officials to signal a high probability of monetary tightening. Despite the ECB’s recent decision to pause rate hikes, rising long-term yields have partially tightened financial conditions, but this relief may be short-lived if policy rates remain static. Market expectations now strongly favor a June rate increase, with cumulative tightening of 70 basis points anticipated by year-end. Traders should prepare for potential euro strength as hawkish ECB sentiment intensifies, particularly if geopolitical tensions keep energy prices elevated.