ECB Holds Into Stagflation As Iran War Rewires China's Crude Map

The ECB held the deposit rate at 2.00% as eurozone April CPI jumped to 3.0% and Q1 GDP stalled at +0.1% — textbook stagflation. Brent briefly hit a four-year high of $126.41/bbl before settling at $114.22 (-3.2%). For Chinese firms going global, the deeper signal is structural: Beijing's seaborne crude flow through the Strait of Hormuz has collapsed 95% to 0.22 mbpd.

What happened. Lagarde kept all three policy rates unchanged (deposit 2.00%, MRO 2.15%, MLF 2.40%) but explicitly flagged "intensified upside inflation risks and downside growth risks." Energy CPI accelerated to +10.9% YoY from +5.1%; services inflation remains sticky at 3.0%. The US 10Y rose 6bps to 4.42% as the Fed's Wednesday hold drew four dissents — the most since 1992. Brent's intraday spike followed Axios reporting on US "short and powerful" strike options against Iran.

Why it matters. The Strait of Hormuz crisis — 65 days of effective closure since February 28 — is now the largest oil supply disruption on IEA record. Daily tanker transits have fallen to single digits. Eurozone stagflation tightens the credit channel for European corporates and widens peripheral spreads (BTP-Bund 5Y CDS up 9bps this week). Pricing implications: every $10/bbl of sustained Brent above $100 lifts global headline CPI by ~30bps and shaves 0.2pp off DM growth.

China angle. China's pre-war Hormuz flow of 4.45 mbpd has collapsed to 0.22 mbpd; Russian seaborne crude has only risen from 1.00 to 1.60 mbpd. The 4.23 mbpd gap is being met by 1.39bn-barrel strategic reserves (~120 days at 2025 import pace) and West African / Latin American rerouting at higher freight cost. CNH held steady at 6.84 — Beijing is absorbing the shock, not exporting it. Belt & Road energy assets in Iraq and the UAE face elevated political-risk reserves.