Borrowing costs climb in Europe and oil tops $105 a barrel as bank says growing price pressures in eurozone will be ‘longer lasting than we had anticipated’

The European Central Bank has raised interest rates to 2.5% and warned that the risk of higher inflation over the next year has risen following renewed fighting in the Middle East.

It came as government borrowing costs soared on the back of a jump in oil and gas prices following the latest US and Iran attacks on ships in the strait of Hormuz.