Eurozone inflation rose unexpectedly in February, adding fresh uncertainty to the European Central Bank’s policy outlook just as escalating tensions in the Middle East threaten to trigger another energy shock.
According to a flash estimate from Eurostat, annual inflation in the euro area climbed to 1.9% in February 2026, up from 1.7% in January. Economists had forecast the rate would remain unchanged. On a monthly basis, consumer prices increased by 0.7%, marking the strongest monthly rise since March 2024.
Core inflation, which excludes volatile energy and food prices, accelerated to 2.4% year on year from 2.2%, also exceeding expectations. The data indicates that underlying price pressures remain persistent, particularly in the services sector.
Eurostat said services inflation rose to 3.4% in February from 3.2% the previous month. Prices for food, alcohol and tobacco were steady at 2.6%, while non-energy industrial goods inflation edged up to 0.7% from 0.4%. Energy prices were still lower than a year earlier, down 4.0%, but the pace of decline slowed, suggesting that the downward pull from energy is easing.
Importantly, the February data was collected before the latest escalation in the Middle East began disrupting energy markets. Since then, oil and gas prices have surged amid concerns over shipping through the Strait of Hormuz, a key route for roughly 20% of global crude oil and natural gas flows.
Iranian retaliatory strikes targeting energy infrastructure in the Gulf have rattled markets. A senior commander of the Islamic Revolutionary Guard Corps warned that shipping through the strait could be blocked. Reports of damaged vessels and insurers withdrawing war-risk cover have heightened fears of tighter gas supplies to Europe.
The prospect of renewed energy disruption has revived memories of the 2022 crisis, when soaring gas prices drove inflation into double digits and hit industrial production.
Philip Lane, chief economist at the European Central Bank, said a prolonged conflict could lift inflation further while weighing on economic growth. He noted that the medium-term outlook would depend on how long the conflict lasts and how broadly it spreads.
Financial markets reacted sharply. The Euro STOXX 50 fell 3.3% by mid-morning, while Germany’s DAX dropped more than 3% to its lowest level since December 2025. France’s CAC 40 declined 2.9%, and Spain’s IBEX 35 and Italy’s FTSE MIB each fell more than 4%. The euro weakened 0.8% against the US dollar to around $1.1600.
With energy prices climbing and core inflation still elevated, policymakers now face a more complicated path as they weigh future interest rate decisions.
