Europe inflation rises to 2.5 per cent in March amid Iran war fuel shock

Representational image. (Pic/AFP)

Europe's inflation rate rose to 2.5 per cent in March, according to official figures released Tuesday, as the Iran war sent fuel prices sharply higher.

The annual rate for the 21 countries using the euro currency compared to 1.9 per cent for February before the war started and blocked supplies of oil and gas from the Persian Gulf.

Energy prices increased 4.9 per cent in March compared to a 3.1 per cent decline in February, Eurostat figures showed.

The war's impact on prices has already hit home at the vast Trionfale indoor market in Rome just north of the Vatican, where vegetable stand owner Anna Caruso said the higher cost of fuel was being reflected in prices for zucchini, eggplant and fruit.

"If the price of fuel increases, those who transport will increase the general price," she said. "With many items, they say, I can't afford this ... and shift toward the cheaper items."

Some prices were higher due to some produce not being in season, said stand owner Paola Ianzi, "but the increase is also partially due to the war because diesel and fuel increased and those who transport fruit and vegetables need to compensate that."

Food price inflation came in at a relatively moderate 2.4 per cent while services, a broad category ranging from medical care to haircuts, rose 3.2 per cent.

European Central Bank head Christine Lagarde has said that businesses may be quicker to raise prices during this outbreak of inflation due to bitter memories of the last episode of higher prices in 2022, when inflation rose to double digits. Russia cut off most supplies of natural gas to Europe and oil prices rose, sending energy costs through the roof.

Iran has blocked most of the tanker traffic through the Strait of Hormuz, the waterway through which some 20 per cent of the world's oil and gas typically passes. That is raising the prospect of sharply tighter markets for fuel in the coming weeks and months.

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