The European Central Bank (ECB) has kept interest rates unchanged as expected but has indicated it is prepared to act if necessary due to rising oil prices. Energy prices have surged since the U.S.-Israeli war on Iran began, leading to bets that inflation could exceed the ECB's 2% target within months. This could force the central bank to tighten policy to prevent rapid price growth from becoming entrenched. Markets now anticipate more than two hikes in the ECB’s 2% deposit rate this year. The ECB acknowledged risks if high energy prices continued, and said it would publish alternative scenarios as part of a separate analysis at 1445 GMT. The bank's economic projections reflected uncertainty, with inflation now expected to rise to the vicinity of 3.7% in the year ahead and take years to come back down to target.