Inflation in Spain accelerated again in April, as persistent tensions in the Middle East continue to push energy prices higher.
Data released on Wednesday by Spain's National Statistics Institute (INE), using the EU-harmonized methodology, showed Spanish consumer prices rose 3.5% year-on-year in April. This marks an increase from the 3.4% annual inflation rate recorded in March, reaching the highest level of inflation since June 2024 and aligning with the consensus forecast from economists surveyed.
Since the outbreak of the Iran conflict, European energy prices have surged significantly, driving the rapid rise in Spanish inflation last month. The Strait of Hormuz handles approximately one-fifth of global oil shipments, and uncertainty regarding the future navigability of this route suggests prices may remain elevated. Influenced by stalled US-Iran negotiations, Brent crude prices have returned to above $110 per barrel.
Eurostat is scheduled to release inflation data for the entire eurozone on Thursday, with the publication timing closely following the European Central Bank's interest rate decision meeting.
The European Central Bank has stated it will act decisively if necessary to curb rising inflation. However, markets widely expect the ECB to keep interest rates unchanged at this meeting, as it continues to assess the extent to which energy price increases are passing through to core inflation.
In a speech last week, ECB President Christine Lagarde stated, "There is no quick shortcut to return to the economic environment we had before the conflict erupted."
She noted, "Households and firms have just gone through a sharp inflationary shock. Their sensitivity to cost increases is significantly higher, and the negative memories are still very fresh."
However, Lagarde added that higher energy prices combined with weaker consumer confidence would dampen overall demand, thereby limiting the scope for increases in both prices and wages.
Previous calculations by the ECB suggest that a 14% rise in oil prices could directly add 0.5 percentage points to the inflation rate.
The Bank of Spain had already raised its inflation forecasts for this year and next at the end of March, increasing its projection for the average rise in consumer prices in 2026 from 2.1% to 3.0%, and its forecast for 2027 from 1.9% to 2.5%.
The ECB forecasts that average eurozone inflation will be 2.6% in 2026, higher than the 2.1% projected for 2025, significantly exceeding the central bank's 2% inflation target.
Economists indicate that if the conflict persists long-term, the increase in consumer prices could peak at 4.8% in 2027. Conversely, in an optimistic scenario where tensions ease, inflation could potentially fall back to the ECB's 2% target level next year.
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