The European Central Bank will ensure that the war in Iran does not cause the sameinflationary pressures in the eurozone as the Russian invasion of Ukraine, according to its head Christine Lagarde.

“We are in a different economic situation, in a better position and we have a greater capacity to absorb shocks,” she told France 24 on Tuesday.“We will do what is necessary to ensure that inflation remains under control and that the French and Europeans do not suffer the same increases in inflation as we saw in 2022 and 2023.”

The situation in energy markets has raised concerns that inflation – which had stabilised around the ECB’s 2% target – could rise again. That in turn could lead to interest rate hikes. Traders have been ramping up forecasts for restrictive monetary policy since the war began in late February. Initially they were talking about two 0.25% hikes in the ECB’s deposit rate this year, but now they are talking about one or none after U.S. President Donald Trump signaled this week that the conflict may soon be over.

Policymakers have shown a willingness to remain flexible, but have said there is currently no urgent need to change borrowing costs.

“Today, there is so much uncertainty that I could not say exactly what we will decide”at the March 18-19 policy meeting, Lagarde said.“We will not rush to make a decision because there is too much uncertainty, too much volatility.”

These market fluctuations were on display this week: Oil contracts surged in large volumes, topping $120 a barrel in the early hours of Monday, the highest levels seen since mid-2022. Then the mood changed sharply – forcing traders to make a dramatic turnaround. “We have a degree of uncertainty and volatility that is absolutely astonishing and is not equivalent to 2022,” Lagarde said, adding that “this makes it difficult to manage the situation.”