European Central Bank Governing Council member Olli Rehn says the conflict in the Middle East is driving inflation and simultaneously weighing on economic growth. Speaking in Sintra, Portugal, Rehn links higher energy costs and related pressures to a “stagflationary” effect—meaning inflation rises while expansion slows. He characterizes the energy shock as producing both sides of the tradeoff, with inflation being supported while consumption and activity are affected by the negative impact on the broader economy. The comments are reported in connection with discussions on the outlook for European monetary policy and inflation dynamics, though Rehn does not outline specific policy actions in the available accounts. Overall, the reports agree that the ECB official sees the current geopolitical-driven energy environment as a factor that keeps inflation pressures elevated while also limiting growth.