Eurozone Inflation Hits Record Highs Amid Middle East War-Driven Oil Price Surge

France and Italy have seen significant increases in their inflation rates due to rising energy costs. The annual rate of inflation in France reached 3% in September, its highest level since February 2024, while Italy's inflation jumped to 4.2%. This is above the European Central Bank's target of 2%, raising expectations that it will raise interest rates further.

The surge in inflation is attributed to high diesel prices in several eurozone countries, including France and Italy, which have reached record highs due to the Middle East war affecting oil shipments. Analysts at ING predict that inflation will remain above 3% for the rest of 2026 before gradually declining in 2027.

The rising interest rates will likely weigh on household purchasing power, particularly in France where consumer spending fell 0.5% in August and public debt stood at nearly double the eurozone limit of 60% in the second quarter.