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Eurozone inflation rose unexpectedly in February, fresh data showed on Tuesday, complicating the European Central Bank’s (ECB) disinflation narrative just as a fast-moving war in Middle East threatens to reignite a new energy shock for Europe.
Euro area annual inflation came in at 1.9% in February 2026, up from 1.7% in January, according to Eurostat’s flash estimate. Economists had expected the rate to hold steady.
On a monthly basis, consumer prices increased by 0.7% — the strongest monthly rise since March 2024.
Core inflation, which strips out energy and food, climbed to 2.4% year-on-year from 2.2%, also above expectations.
Crucially, this data was collected before the latest Middle East escalation began to disrupt energy markets.
ECB Chief Economist Philip Lane warned on Tuesday that a prolonged war could push eurozone inflation higher and weigh on growth, while stressing that the medium-term outcome will depend on the conflict’s scope and duration.
Service pressures re-emerge, core inflation ticks higher
Eurostat said services inflation is expected to run at 3.4% year on year in February, up from 3.2% in January. Food, alcohol and tobacco held steady at 2.6%, while non-energy industrial goods accelerated to 0.7% from 0.4%.
Energy prices were still falling compared with a year earlier but less so than in January (-4.0%), hinting that the drag from energy is fading even before inflation statistics fully digest the latest geopolitical turmoil.
Notably, February’s flash estimate predates the most acute market moves triggered by the widening conflict in the Middle East — meaning the bigger concern for inflation is what comes next.
Iranian forces have retaliated with strikes targeting critical energy infrastructure across the Gulf region.
On Monday, a senior commander of the Iran Revolutionary Guard Corps announced to block shipping through the Strait of Hormuz.
The strait is a critical chokepoint for roughly 20% of global crude oil and natural gas flows.
Trading in the Strait of Hormuz has been disrupted, with ships damaged or stranded and insurers pulling back war-risk cover — factors that can quickly translate into tighter gas supply and higher delivered prices for Europe.
The disruption is already feeding memories of the 2022 energy crisis when gas prices surged, industrial output faltered and consumer inflation soared into double digits.
A weakened euro
Equities sold off across Europe. The Euro STOXX 50 was down 3.3% by mid-morning, while Germany’s DAX 40 slid more than 3% to its lowest level since December 2025.
France’s CAC 40 fell 2.9%, and Spain’s IBEX 35 and Italy’s FTSE MIB were both down more than 4%. The euro also weakened, down 0.8% against the US dollar at around $1.1600.
February data already pointed to sticky underlying inflation pressures, particularly in services.
Energy, meanwhile, had been doing much of the work in pulling headline inflation lower — but that support would fade quickly if oil and gas prices keep climbing.
A prolonged disruption, especially if the Strait of Hormuz were closed for weeks, could push headline inflation back above 2%, feed through to transport and food costs, and further complicate the ECB’s interest-rate path.
