Euro-area inflation picked up in July after the collapse of a US-Iran ceasefire boosted oil prices, reinforcing expectations that the European Central Bank will need to raise interest rates again.

(July 31): Euro-area inflation picked up in July after the collapse of a US-Iran ceasefire boosted oil prices, reinforcing expectations that the European Central Bank will need to raise interest rates again.

Consumer prices increased an annual 2.9% after 2.8% in June, Eurostat said on Friday. The reading is in line with the median estimate in a Bloomberg survey and follows stronger-than-anticipated upticks in France and Spain.

Across the 21-nation bloc, energy surged 10%, while a gauge for services and one excluding volatile items such as fuels and food also accelerated.

The report comes a week after policymakers took a break from lifting borrowing costs, allowing more time to collect information on how a re-escalating conflict in the Middle East affects euro-zone inflation and growth. Economists and investors predict a hike in September, adding to June’s quarter-point step.

“Today’s numbers, together with developments in the Middle East over the course of July, put the ECB firmly on a path to hike in September,” said Kamil Kovar, head of euro-zone forecasting at Moody’s Analytics.

German bonds gave up earlier gains to slip lower, lifting the 10-year yield one basis point to 3.16%. Money markets continue to see a 90% chance of a quarter-point increase in September, but they lifted bets on further tightening slightly, pricing 42 basis points of hikes by year end.

Officials will received one more set of inflation figures – for August – ahead of their September meeting, as well as updated projections prepared by ECB staff. While President Christine Lagarde refused last week to pre-commit to a move, some of her peers have left little doubt about the direction for policy ahead.

Austria’s Martin Kocher said on Friday that “uncertainty and volatility remain high.”

That follows remarks from Gediminas Simkus of Lithuania, who said that the probability of a hike is “much higher” than that of a hold. His Slovak colleague Peter Kazimir went one step further, arguing that the ECB will have to raise rates at least once more “even if the situation improves somewhat.”

For the moment, signals from the Middle East are mixed, after shipping through the Strait of Hormuz picked up recently even as the US and Iran returned to exchanging air strikes. Oil prices – while back below US$100 a barrel – remain elevated.