The EU warns that the conflict in Iran may push the inflation rate above 3%.

The EU warned that if the Middle East war causes the price of Brent crude oil to remain around $100 per barrel, and gasoline prices to stay high for a longer period of time, the inflation rate could exceed 3%. In this scenario, economic growth in 2026 will also be impacted. According to sources, Valdis Dombrovskis, the EU Commissioner for Trade, told finance ministers of EU countries last week that the growth rate could be up to 0.4 percentage points lower than the forecast of 1.4% made at the end of last year. In addition to oil prices, the scenario also assumes that the price of natural gas in Europe will remain around 75 per megawatt hour for the remaining time this year. This means that the inflation rate in 2026 could be 0.7-1 percentage point higher than the previous forecast of 2.1%. A significant increase in inflation could force the European Central Bank to raise interest rates in response, as traders have already increased bets on such action this year. The ECB's next decision is on March 19, but it is not expected to raise interest rates at that time.