European Central Bank preview via Reuters, in breif:Summary:ECB widely expected to hold rates at 2% amid heightened uncertaintyIran war-driven energy shock revives upside inflation risksMarkets pricing potential hikes despite economist consensus for holdLagarde likely to emphasise vigilance and optionality2022 energy crisis still shaping policy sensitivityScenario analysis to guide outlook amid uncertain conflict durationFiscal expansion and rising yields adding tightening pressureThe European Central Bank is expected to leave its key policy rate unchanged at 2% at its upcoming meeting, but signal a more hawkish stance as escalating tensions in the Middle East revive concerns about energy-driven inflation.A sharp rise in oil and gas prices following the U.S.-Israeli strikes on Iran has reintroduced a familiar risk for policymakers: a sustained energy shock feeding into broader consumer prices. For the euro area, which remains heavily reliant on imported energy, the pass-through from higher fuel costs could prove significant if the conflict persists.Market pricing has already begun to reflect this risk. Traders are increasingly positioning for a renewed tightening cycle, with expectations building for as many as two rate hikes by year-end. This contrasts with a more cautious economist consensus, which still largely anticipates a prolonged pause as growth headwinds intensify.ECB President Christine Lagarde is expected to walk a careful line, reinforcing the central bank’s readiness to act while avoiding firm forward guidance. The likely message is one of vigilance, with policymakers seeking to anchor inflation expectations without committing prematurely in an environment marked by unusually high uncertainty.That caution is informed by experience. The energy-driven inflation surge following Russia’s invasion of Ukraine in 2022 forced the ECB into aggressive tightening after initially underestimating the persistence of price pressures. That episode continues to shape internal thinking, increasing sensitivity to the risk of second-round effects, particularly via wages and inflation expectations.At the same time, policymakers acknowledge key differences. Monetary and fiscal settings are less accommodative than in 2022, potentially limiting the scale of any inflation overshoot. Still, the trajectory will depend heavily on how the conflict evolves, a factor the ECB has little visibility on.To address this uncertainty, the central bank is expected to present scenario-based projections outlining potential paths for growth and inflation under both short-lived and prolonged conflict outcomes. These scenarios will be closely scrutinised by markets, particularly in light of rising bond yields and expectations of increased fiscal spending across the bloc. This article was written by Eamonn Sheridan at investinglive.com.