Eurozone Inflation Hits 3-Year High as Energy Prices Soar

The recent war in the Persian Gulf is having a ripple effect across the eurozone, pushing inflation to its highest level since the fall of 2023. According to a flash estimate from Eurostat, inflation rose to 3.8 percent in September, up from 3.2 percent in August.

The main driver behind this increase is energy prices, which have risen by 18.8 percent compared to last year. Brent crude oil has surged over 14 percent to around $103 a barrel, driven by restrictions on shipping through the Strait of Hormuz.

While some economists had expected a slightly smaller increase in inflation, many now expect another rate hike from the European Central Bank (ECB). 'An ECB rate hike in December is as good as set in stone,' said Thomas Gitzel, chief economist at VP Bank. However, there are also arguments against tightening quickly, as core inflation has risen only slightly and wages have not shown a material response to the energy shock.

The impact of high inflation can be seen in households across the eurozone, particularly when filling up their cars or heating their homes. Governments are trying to counter this with modest support measures, but rising interest rates also make loans more expensive for consumers and businesses alike.