Ceasefire Sparks Respite in ECB Rate Hike Predictions Amid Hormuz Tensions

Traders revised their expectations for future European Central Bank (ECB) rate hikes after a temporary ceasefire was declared in the ongoing Iran conflict. However, they are still anticipating two rate tightening moves by the year's end as uncertainty looms over a permanent resolution.

Despite the ceasefire, the crucial Strait of Hormuz remains closed, with Gulf states reporting continued Iranian missile attacks well after the ceasefire was meant to take effect. A senior Iranian official indicated a possible reopening of the Strait this Thursday or Friday in anticipation of peace talks.

Oil prices dropped significantly to below $100 per barrel on Wednesday, after experiencing a more than 50% surge in March. This development has affected the markets' expectations for the ECB's monetary policy decisions in the short term, according to Rohan Khanna, head of euro rates strategy at Barclays.