Euro area: War-driven energy shock reshapes ECB path – Commerzbank

Commerzbank’s Dr. Vincent Stamer updates Euro area inflation projections incorporating the Iran War and associated energy shock. The bank expects higher Oil and natural gas prices to push headline inflation above 3% in 2026 before easing back to the ECB’s 2% target by 2027. Core inflation is seen re-accelerating later as energy costs filter through.

Energy shock lifts Euro area inflation

"The Iran War is likely to drive up core inflation in the euro area – even if the war ends within the next two months. This is supported by forecasts of our quantitative model for euro area inflation. We combine these results with a detailed analysis of February’s inflation data and our scenario analysis for the Iran War to outline a likely path for inflation in the euro area."

"Given current developments, we expect headline inflation to return to the ECB’s 2% target by 2027."

"The war in Iran and the de facto closure of the Strait of Hormuz are driving up energy prices and lead to higher prices for oil products, natural gas, fertilizers, and logistical services in the euro area as well."

"In our baseline scenario, inflation rises slightly above 3% in the second quarter of 2026 and falls steadily to just under 2% by the second quarter of 2027. This baseline scenario forms the framework for our new inflation forecast."

"Following the delayed effect of energy prices on goods and services, the core rate rises again starting in October and then peaks at 2.4% in the first quarter of 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)