FRANKFURT: Companies across the eurozone are warning of a potential new wave of inflation similar to the post-pandemic spike if the war in Iran continues for months and disrupts supplies of fuel, hydrogen, and helium, according to a survey by the European Central Bank released on Monday.
The European Central Bank kept interest rates unchanged last week but discussed the possibility of a hike to tackle rising inflation, indicating it may begin increasing borrowing costs in June.
The bank’s quarterly survey of major non-financial firms showed that companies in sectors such as air travel, logistics, chemicals, plastics, and packaging have already increased prices—often by double-digit percentages—or announced upcoming hikes. This reflects a surge in oil prices since the conflict began.
However, the broader impact on overall prices—key for ECB policy—is expected to be more gradual than during the Russian invasion of Ukraine, as many large firms have hedged against energy price volatility.
“This hedging should limit the impact somewhat in the short term, as the pass-through of higher energy prices for these firms was less direct, coming mainly or only via smaller, unhedged suppliers seeking higher input prices,” the ECB said.
Still, if the conflict continues and disrupts the Strait of Hormuz, businesses expect inflationary pressures similar to those seen in 2022–23.
“A conflict lasting months rather than weeks – with the Strait of Hormuz remaining blocked and/or further attacks on oil and gas infrastructure – would result in global shortages not only of fuel but also of many products requiring oil derivatives for their manufacture,” the ECB said, citing hydrogen and helium.
The ECB noted some mitigating factors compared to the post-pandemic period, including weak global demand—particularly from China—the absence of a strong services boom, and reduced fiscal stimulus.
The survey was conducted among 67 non-financial companies, mainly between March 23 and April 1.
