The war drives up prices in Europe, with the Spanish state as one of the major affected parties

BarcelonaThe war conflict in the Middle East is already impacting the pockets of European citizens. The cost of living during the month of March has soared in the eurozone, placing the year-on-year inflation rate at 2.5%. This figure represents an acceleration of six tenths compared to February (1.9%), when prices had not yet been affected by the shortage of raw materials resulting from the closure of the Strait of Hormuz. The six-tenths increase marks the largest jump in prices in the region since October 2022, when hydrocarbons skyrocketed due to the war between Russia and Ukraine.

According to provisional data published this Tuesday by Eurostat – the community's statistical office –, Spain, however, stands out as the major economy in the eurozone with a higher impact on prices and is moving away from the ECB's target, which aims to keep inflation around 2%. Specifically, in Spain, the increase in the cost of living compared to March 2025 stood at 3.3%, which is eight tenths more than in February (2.5%). In comparison with other countries, Cyprus and Italy – both at 1.5% – and France – 1.9% – are the least affected countries by the price increase, while Croatia, Lithuania, and Luxembourg, at 4.7%, 4.5%, and 3.8% respectively, lead the growth in the eurozone. In Spain, fuel prices showed an upward trend during the first weeks of the conflict, but government-incentivized price reductions have lessened their impact.

Energy prices have been the main culprit for the sharp increase in the last month. In fact, while the inflation rate for these products was negative in February (-3.1%), during this month it has soared in the eurozone and has risen to 4.9% year-on-year. Services (3.2%, compared to 3.4% in February), food, alcohol and tobacco (2.4%, versus 2.5%), and non-energy industrial goods (0.5%, compared to 0.7%) have also become more expensive, although to a lesser extent than during last month's year-on-year calculation. This fact has moderated core inflation – which excludes energy and food – by one tenth in March, standing at 2.3%.

Above the target

Despite this highly localized price increase, fuel prices have caused inflation to exceed the European Central Bank's (ECB) target of 2% for the first time since the beginning of the year. It is worth remembering that, last week, the head of the institution, Christine Lagarde, assured that they would not hesitate to raise rates if prices remained comfortably and persistently above the target. Despite this, we will now have to see how prices evolve in the coming months: during March, experts already foresaw an increase in year-on-year energy prices, as during this month in 2025 there was a sharp drop in fuel costs, and what is known as the "base effect" was created – a distortion in the year-on-year inflation rate caused by how high or low prices were 12 months ago.

This context has already led various entities to revise their forecasts for this 2026. Specifically, the ECB foresaw an increase in inflation two weeks ago, when it revised the inflation forecast for 2026 upwards by eight tenths, to 2.6%, precisely taking into account a possible increase in the price of oil and gas in the event that the conflict in the Middle East drags on. For its part, last week, the Organisation for Economic Co-operation and Development (OECD) also revised its forecasts for the eurozone, and raised its inflation rate projections by 7 tenths, which it expects to stand at around 2.6% this year. For Spain, the entity forecasts an increase in the CPI of 3%, seven tenths higher than what they predicted in their last report.