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Annual inflation in the 21 countries that use the euro rose to 3.0% from 2.6% in March, driven by a 10.9% increase in energy prices, the European Union’s statistics agency Eurostat reported on Thursday.
Among the main components, energy recorded the highest annual increase in April at 10.9%, compared with 5.1% in March. This was followed by services at 3.0% (down from 3.2%), food, alcohol and tobacco at 2.5% (up from 2.4%), and non-energy industrial goods at 0.8% (up from 0.5%).
Prices across Europe have been fuelled by soaring energy costs due to the Iran war. Oil prices hit a new wartime record on Thursday morning, with international Brent crude priced above $126 a barrel temporarily in the morning, from around $73 before the outbreak of the war on 28 February.
Eurozone economic output slowed
In a double blow to the eurozone, the bloc’s growth in the first three months of the year disappointed, with a marginal increase of 0.1% compared with the previous quarter, according to Eurostat.
The economy expanded at the same rate in the wider EU in the first three months of 2026. In the fourth quarter of 2025, GDP had increased by 0.2% in both areas.
Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 0.8% in the euro area and by 1.0% in the EU in the same period.
This marks a slowdown in economic output as it follows a GDP expansion of 1.3% in the euro area and +1.4% in the EU in the previous quarter.
The war is delivering a major shock to the global economy because Iran has blocked the Strait of Hormuz, the route through which around 20% of the world’s oil had passed en route from producers in the Persian Gulf to customers.
The combination of slow growth and high inflation — known as stagflation — threatens to become a serious challenge for the European Central Bank. Policymakers are expected to leave the benchmark interest rate unchanged on Thursday, even though inflation is now clearly above the bank’s 2% target.
The rise in inflation is especially concerning because it comes at a time of sluggish economic growth. The usual response to inflation is for a central bank to raise its benchmark interest rate, but this can dampen growth by increasing borrowing costs.
If inflation is expected to be temporary, policymakers often look through it, as changes in interest rates take time to feed through to the economy.
The Bank of Japan and the Federal Reserve both left rates unchanged at meetings this week, and the Bank of England is also expected to hold steady on Thursday.
As a result, the ECB and other central banks appear to be holding a position, cautiously monitoring inflation while refraining from both rate rises and cuts. The ECB’s benchmark rate has remained at 2% since June 2025.