ECB Chief Economist Lane warned that inflation from the Iran conflict could persist well beyond any resolution, citing second-round effects, supply chain repositioning, and non-linear price dynamics. Summary:Source: ECB Chief Economist Philip Lane, speaking at the Bank of Japan-IMES Conference in Tokyo, 27 May 2026Lane said second-round inflation effects from the energy shock will persist even if the initial shock begins to reverseEven a resolution of the Iran conflict may not quickly unwind its inflationary consequences, as the prolonged duration of the war has prompted repositioning in energy diversification strategiesLane said there may be a persistent inflation element stemming from the Middle East conflict even after its acute phase endsA key lesson from past energy shocks at the ECB was the non-linearity of inflation: once prices rise sharply enough, a range of additional self-reinforcing mechanisms are activatedLane said the ECB must ensure there is no entrenched belief among the public or price-setters that inflation will remain too high for too longEuropean Central Bank Chief Economist Philip Lane warned on Wednesday that the inflationary consequences of the Iran conflict are likely to outlast the conflict itself, telling a central banking conference in Tokyo that second-round effects, supply chain repositioning, and non-linear price dynamics could keep inflation elevated well after any resolution.Lane was speaking at the Bank of Japan-IMES Conference, the same forum where Minneapolis Fed President Kashkari and Fed Vice Chair Jefferson also addressed the inflation outlook earlier in the day, giving the event an unusually concentrated gathering of senior central bank voices at a moment of acute global price pressure.His core message was a warning against assuming that an end to the fighting in Iran translates quickly or cleanly into lower inflation. Even if the initial energy shock begins to reverse, Lane said, the second-round effects, the way higher energy costs feed into wages, transport, manufacturing inputs, and services pricing, will remain in the system for a considerable period. That dynamic, he indicated, is not optional or uncertain. It is already underway.Lane went further, arguing that the duration of the conflict has itself become an inflationary factor independent of its eventual outcome. Because the war has gone on long enough for businesses and governments to begin repositioning their energy sourcing and supply chain strategies, those structural adjustments may prove sticky even if a ceasefire or settlement is reached. The optimal diversification strategies being adopted now represent a permanent shift in how energy is procured and priced, not a temporary detour.Drawing on the ECB's own experience navigating the post-pandemic and Ukraine war inflation episodes, Lane highlighted what he described as the non-linearity of high inflation environments. Once inflation rises sharply enough, a range of self-reinforcing mechanisms are activated that do not operate at lower inflation levels. Pricing behaviour changes, wage negotiations shift, and inflation expectations begin to move in ways that are difficult to reverse. The ECB learned this the hard way, and Lane's framing suggested he views the current environment with the same vigilance.His final point was directed at the credibility of the ECB's inflation anchor. The central bank must ensure, he said, that neither the public nor price-setters come to believe that inflation will remain too high for too long. Once that belief takes hold it becomes self-fulfilling, and dislodging it requires a far more costly and disruptive policy response than preventing it in the first place.--Lane's comments carry significant weight for European rate expectations, suggesting the ECB is not banking on a clean disinflation once the Iran conflict eases. The warning on second-round effects and persistent inflation beliefs is a signal that the bar for ECB rate cuts remains high even in a ceasefire scenario. His reference to non-linear inflation dynamics, drawn from the ECB's own experience of the post-pandemic price surge, is a reminder that central banks view the current episode with hard-won caution. Energy markets will note that even a resolution of the conflict may not remove the structural repositioning in supply chains and diversification strategies that the war has already set in motion. This article was written by Eamonn Sheridan at investinglive.com.