Europe's Energy Crisis Deepens as Middle East Tensions Soar

Rising energy prices are putting pressure on inflation in Europe as tensions in the Middle East heighten risks to energy supplies.

The price of oil climbed to six-week highs amid escalating tensions and concerns over possible disruptions to energy shipments through the Strait of Hormuz. Brent crude briefly rose above $97 a barrel before giving up some of its gains, while West Texas Intermediate (WTI) crude climbed to nearly $93 a barrel.

The impact of higher energy costs is already visible in Europe's latest inflation data. Preliminary figures released by Eurostat on Tuesday showed that annual inflation in the eurozone was expected to rise to 3.3 percent in August from 2.9 percent in July, with energy prices rising 14.3 percent year on year.

The European Central Bank (ECB) is facing a difficult balancing act between containing inflation and avoiding a recession in the event of an energy supply shock, according to Carsten Brzeski, global head of macro at ING Research.