Eurozone Inflation Jumps to 3% Amid Energy Price Spike Fueled by Iran War
Inflation in the euro area is picking up sharply again. According to Eurostat, the statistical office of the European Union, the annual inflation rate rose to 3.0 percent in April 2026, up from 2.6 percent in March. This means that price increases are once again moving away from the European Central Bank’s target. The ECB is responding to this development with caution and is leaving its key interest rates unchanged for the time being.
Here is an overview of the countries:
| Annual rate | Monthly rate | |||||||
|---|---|---|---|---|---|---|---|---|
| Apr 25 | Nov 25 | Dec 25 | Jan 26 | Feb 26 | Mar 26 | Apr 26 | Apr 26 | |
| Belgium | 3.1 | 2.6 | 2.2 | 1.4 | 1.4 | 2.2 | 4.3e | 1.4e |
| Bulgaria | 2.8 | 3.7 | 3.5 | 2.3 | 2.1 | 2.8 | 6.2e | 2.0e |
| Germany | 2.2 | 2.5 | 2.0 | 2.1 | 2.0 | 2.8 | 2.9e | 0.5e |
| Estonia | 4.4 | 4.7 | 4.0 | 3.8 | 3.2 | 3.5 | 3.3e | 0.9e |
| Ireland | 2.1 | 3.1 | 2.7 | 2.5 | 2.5 | 3.6 | 3.6e | 0.5e |
| Greece | 2.6 | 2.8 | 2.9 | 2.9 | 3.1 | 3.4 | 4.6e | 1.7e |
| Spain | 2.2 | 3.2 | 3.0 | 2.4 | 2.5 | 3.4 | 3.5e | 0.7e |
| France | 0.9 | 0.8 | 0.7 | 0.4 | 1.1 | 2.0 | 2.5e | 1.2e |
| Croatia | 4.0 | 4.3 | 3.8 | 3.6 | 3.9 | 4.6 | 5.4e | 1.4e |
| Italy | 2.0 | 1.1 | 1.2 | 1.0 | 1.5 | 1.6 | 2.9e | 1.7e |
| Cyprus | 1.4 | 0.1 | 0.1 | 1.2 | 0.9 | 1.5 | 3.0e | 2.2e |
| Latvia | 4.0 | 3.8 | 3.4 | 2.9 | 2.4 | 3.4 | 3.0e | 0.6e |
| Lithuania | 3.6 | 3.6 | 3.2 | 2.8 | 3.3 | 4.4 | 4.9e | 0.7e |
| Luxembourg | 1.7 | 3.5 | 3.3 | 1.6 | 1.8 | 3.8 | 5.2e | 2.0e |
| Malta | 2.6 | 2.4 | 2.5 | 2.3 | 2.3 | 2.3 | 2.4e | 3.3e |
| Netherlands | 4.1 | 2.6 | 2.7 | 2.2 | 2.3 | 2.6 | 2.5e | 1.7e |
| Austria | 3.3 | 4.0 | 3.8 | 2.1 | 2.3 | 3.1 | 3.3e | 0.4e |
| Portugal | 2.1 | 2.1 | 2.4 | 1.9 | 2.1 | 2.7 | 3.3e | 2.0e |
| Slovenia | 2.3 | 2.4 | 2.6 | 2.4 | 2.8 | 2.4 | 3.4 | 1.8 |
| Slovakia | 3.9 | 3.9 | 4.1 | 4.3 | 4.0 | 3.7 | 4.0e | 0.4e |
| Finland | 1.9 | 1.5 | 1.7 | 1.0 | 1.8 | 2.5 | 2.3e | 0.0e |
Energy prices driving inflation upward
By far the largest driver of inflation in April is energy. The annual rate in the energy sector jumped from 5.1 percent in March to 10.9 percent in April, reaching the highest value among all components. The ongoing war in the Middle East, which is putting considerable pressure on energy markets, is considered the main reason for this.
The other components of the basket also developed predominantly upward. An overview of all main components illustrates the extent of price dynamics:
| Component | April 2026 | March 2026 |
|---|---|---|
| Energy | 10.9% | 5.1% |
| Services | 3.0% | 3.2% |
| Food, alcohol and tobacco | 2.5% | 2.4% |
| Non-energy industrial goods | 0.8% | 0.5% |
War in the Middle East as the central risk
The ECB identifies the war in the Middle East as the decisive factor behind the current rise in prices. The conflict has driven energy prices sharply higher while simultaneously weighing on the economic climate. This places the monetary guardians before a classic dilemma: rising inflation on one side, growing risks to growth on the other.
“The war in the Middle East has caused energy prices to rise sharply, which is driving up inflation and weighing on the economic climate,” the ECB states.
According to the ECB, how strongly and for how long this shock will have an effect depends on several factors: the intensity and duration of the rise in energy prices, as well as the extent of indirect effects and possible second-round effects. The longer the conflict continues, the more perceptible the consequences for prices and the economy will be.
Why the ECB is not changing its key interest rates
Despite the rise in inflation, the ECB Governing Council has decided to leave the three key interest rates unchanged. The rate on the deposit facility remains at 2.00 percent, the main refinancing rate at 2.15 percent, and the marginal lending rate at 2.40 percent.
The ECB’s reasoning rests on several arguments. On the one hand, inflation expectations over longer horizons were still firmly anchored recently, even though they have risen considerably over shorter horizons. On the other hand, the euro area economy has proven resilient over the past quarters. In the Governing Council’s assessment, the newly available data are broadly in line with the previous assessment of the inflation outlook.
Data-driven approach instead of a fixed rate path
The ECB explicitly emphasises that it does not commit in advance to a particular interest rate path. Instead, the Governing Council pursues a data-driven approach and decides meeting by meeting. The basis for each decision is the current economic and financial data, the assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission.
In addition, the ECB has at its disposal the so-called Transmission Protection Instrument. It is designed to counter unjustified and disorderly market dynamics that could jeopardise the transmission of monetary policy across the euro area. At the same time, the holdings from the Asset Purchase Programme (APP) and the Pandemic Emergency Purchase Programme (PEPP) continue to decline at a measured and predictable pace.
Outlook: uncertainty remains high
The situation in the euro area remains tense. In the ECB’s assessment, the upside risks to inflation and the downside risks to growth have increased. Whether and when the central bank adjusts its monetary policy course will depend significantly on how the energy price shock develops and whether inflation finds its way back towards the two-percent target over the medium term. The ECB has signalled that it will monitor the situation closely and deploy all
