FRANKFURT, July 1 -- Annual inflation in the euro area fell to 2.8 percent in June, according to a flash estimate from Eurostat published Tuesday, dropping sharply from 3.2 percent in May and beating analyst expectations in a reading that gives the European Central Bank its first meaningful piece of good news since it raised interest rates three weeks ago. The driver of the decline was the same factor that prompted the June hike: energy.

Energy price inflation in the euro zone eased to 8.7 percent year-on-year in June from 10.8 percent in May, according to the Eurostat flash release. That deceleration reflects the retreat in global oil prices since the Iran conflict's most acute phase and the partial normalization of Strait of Hormuz shi...