The European Central Bank meets again on July 23, with oil prices back at the top of the worry list for policymakers.
Last month's quick retreat in energy prices removed the immediate pressure on policymakers to raise rates, but the relief has proven short-lived, which highlights the uncertainty ahead, as a durable resolution to the Iran war looks elusive.
Here are five key questions for markets:
1/ What will the ECB do next Thursday?
Most likely hold its key rate at 2.25% following a June hike that made it the first among the biggest central banks to raise rates in response to the war.
A re-escalation in the war has pushed up oil and natural gas prices. But oil around $85 a barrel remains far below the highs in March and April, so policymakers aren't in a rush to act immediately.
In a reflection of the uncertainty, however, markets are still pricing in a small chance of a move.
"There will be questions on whether a hike in July was discussed. I'm pretty sure that a few (policymakers) might bring it up," Morgan Stanley's chief Europe economist Jens Eisenschmidt said.
That discussion could be a way to signal the ECB's current thinking on September, he said.
2/ How does the Iran war escalation change the outlook for the ECB?
So far, the limited rise in oil prices compared to earlier in the war means the picture hasn't changed materially from policymakers' expectations in June.
The oil futures curve is currently trading between the baseline and milder scenarios Frankfurt set out then, which boosts the case for a July hold.
"Policymakers can probably wait until September for more clarity on how developments in the Middle East affect inflation and the inflation outlook," said Rabobank senior macro strategist Bas van Gaffen.
3/ Will the ECB hike rates again this year?
Yes, traders and economists polled by Reuters expect, most likely in September, when it releases fresh economic projections.
Even when oil prices were falling, sources told Reuters that the case for a hike later after July remained firm.
And as they have risen again, traders have also boosted their bets that an additional move would follow September's by year-end. But only three out of 74 economists Reuters polled share that expectation.
"It's super clear when we listen to the vast majority of ECB speakers, they simply are more concerned about missing inflation again to the upside than they are about the risk of what they still see as a weak but resilient economic outlook," said Ross Hutchison, head of euro zone market strategy at Zurich Insurance Group.
The shortage of fertiliser from the Middle East, along with a European heatwave, could put some upward pressure on food prices, lifting inflation, even if energy costs ease again.
Still, with little sign of second-round effects or wage pressures accelerating so far, some analysts are sceptical that the ECB needs to hike rates further at this stage.
4/ How would an increase to the ECB's minimum reserve requirement impact markets?
It would drain liquidity a little bit more quickly, bringing forward the time at which money markets become more sensitive to liquidity conditions, analysts said.
The ECB is considering doubling the proportion of cash that lenders must keep as reserve in an unremunerated account, Reuters reported recently, which would cut the interest it has to pay banks on their excess reserves, which rises as rates do.
Societe Generale expects any impact on short-term funding markets will be modest.
This measure would reduce the amount of excess liquidity in the system by around 160-170 billion euros, compared to the roughly 500 billion euros per year that quantitative tightening is already draining from the system, it said.
5/ Is the digital euro finally gaining traction?
Yes. The ECB secured key parliamentary backing in June for the project after three years of wrangling with banks, which fear deposit outflows and lost revenues.
Launching a digital euro has become more pressing for Frankfurt since President Donald Trump's tariffs raised fears the U.S. could one day weaponise its dominance over U.S. payment networks.
The aim is for negotiations to produce a final law by year-end. A pilot programme will start next year, followed by a 2029 launch
The digital euro is a good starting point to reduce dependency on foreign payment networks, but the focus on retail users so far in its design will limit that aim, Morgan Stanley's Eisenschmidt said.
