The conflict in Iran has put an end to the moderation in commodity prices, which had helped to reduce inflation in Europe. This disinflation enabled the ECB to lower its key interest rate, which contributed to the rebound in growth in 2025. The conflict could reverse these trends, with the extent of the reversal depending on the still highly uncertain outcome of the conflict in the coming weeks.
At the time of recording this video, fuel prices in France had already risen by 12% compared to the end of February. The continued rise in oil prices on the markets, which exceeded $100 per barrel on March 9, even suggested that the increase may continue. In 2022, fuel prices had risen by 19% in the Eurozone and 17% in France in March, adding 0.6 percentage points to inflation for that month.
If the shock of 2022 were to repeat itself, inflation would accelerate from 1.1% in February 2026 to 1.7% in March in France. In the Eurozone, it would once again exceed the 2% threshold, approaching 2.5% in March compared with 1.9% in February.
However, in the longer term, the impact depends on how the conflict evolves, which remains uncertain. Nevertheless, two factors suggest that the peak in inflation will be more moderate than in 2022:
- The starting point. Harmonized inflation reached 1.1% in France and 1.9% in the Eurozone in February (compared with 4.1% and 5.9% respectively in February 2022). Supply-side constraints are significantly more moderate than they were at that time. Furthermore, before the outbreak of the conflict in Iran, the oil market was characterized by a structural excess of supply over demand.
- The shock is likely to be shorter-lived this time, even if the Strait of Hormuz is blocked for several weeks. This is particularly likely to be the case for gas prices. In 2022, the European Union had undertaken to cut off Russian supplies. This is not the case today: once the Strait of Hormuz is cleared, trade can resume.
We see three possible scenarios for how the conflict might unfold. The first, de-escalation, implies that the conflict will decrease in intensity and that oil and gas prices will return to their late February levels within a few weeks. The second scenario assumes a prolonged period of political uncertainty in Iran. In this case, the rise in oil and gas prices would be less significant but more lasting. The third scenario, escalation, would be accompanied by strong and lasting tensions on oil and gas supplies.
In the first two scenarios, the impact on inflation would be temporary in the first case and more lasting in the second but would be moderate in both cases. The impact on growth would be moderate. The ECB should remain cautious but would not necessarily have to raise its key interest rate.
In the third scenario, the most negative one, the price of oil would remain at an average of $100 per barrel in the second quarter, while the TTF (the benchmark for gas prices in Europe) would exceed €100 per MWh, before falling back from the third quarter onwards. The inflationary shock would spread to electricity prices and other sectors, including food, goods, and services. According to our calculations, inflation would be 0.9 percentage points higher in 2026 compared to our pre-conflict scenario, which was 1.6% on average in the Eurozone and 1.1% in France.
Growth would thus be reduced by around 0.5 points in the Eurozone. Furthermore, as inflation is expected to be around 4% in the Eurozone at the end of the year, the ECB will probably have to raise its key interest rates to prevent a more sustained inflationary trend from taking hold.
