The inflationary cycle triggered by the war in the Middle East is prompting central banks to shift their focus to raising interest rates, potentially jeopardizing the expected improvement in demand for stainless steel.

Respondents who participated in the study of MEPs expressed concern about rising prices for energy, transport and raw materials this month. Rising costs have already led to the suspension of some projects related to the production of stainless steel, and rising inflation threatens to further reduce investment.

In the United States, consumer price inflation rose to 4.3% in May, exceeding 4% for the first time in three years. At its June meeting, the Federal Reserve kept interest rates at 3.5–3.75%. However, 15 of the 18 voting members of the Fed expect a rate hike before the end of the year.

The European Central Bank (ECB) raised its interest rates by 0.25 percentage points to 2.25% at its June meeting. The ECB's first rate hike in three years came after eurozone inflation rose to 3.2% in May.

A similar trend is observed in Japan. The Bank of Japan (BOJ) raised interest rates to a 31-year high of 1% this month. Despite the increase, the value of the yen dropped to an almost 40-year low, which put upward pressure on the cost of imported raw materials for stainless steel producers.

Japan's producer price index rose 6.3% year-on-year in May, exceeding forecasts for a 5.5% increase. The Bank of Japan cited the effects of higher prices for non-ferrous metals, as well as chemical and petroleum products, as a result of the closure of the Strait of Hormuz.

• This article first appeared in the June issue of the International Stainless Steel Review from MEPS. The publication provides information on market conditions, stainless steel prices, indices and forecasts in key markets in Europe, Asia and North America. Contact the members of the European Parliament for detailed information on how to subscribe.

MEPs, the prices of cold-rolled 304 rolls in Japan have increased by only 3.6% since the beginning of 2026. Meanwhile, according to MEPS, average prices for the same product in Europe and the United States increased by about 14% over the same period.

Since the beginning of the US-Iranian conflict on February 28, stainless steel market participants have felt the effects of rising energy prices, especially in Europe and Asia. Increased transportation costs have increased the cost of purchases.

Global sulfur supplies have also declined. The Middle East accounts for almost half of the world's exports of these raw materials, which are formed as a by-product during the processing of natural gas and oil. Significant loss