Provided that the US-Iran deal to re-open the Strait of Hormuz is sustained, we think the damage from the Iran war will prove to be mild. GDP in the euro-zone excluding Ireland would grow by around 0.8% this year and 1% in 2027 and 2028 – which is somewhat below the ECB and consensus forecasts. In this scenario, headline inflation would already be close to its peak as energy inflation should decline and any increase in food and core inflation would be small. Most importantly, second-round effects on wages will be trivial. As a result, the ECB would be able to leave rates unchanged and well below the levels discounted in financial markets.