Iran Conflict Prolongs High Inflation in Eurozone, Warns ECB Policymaker

European Central Bank policymaker Olli Rehn has warned that the ongoing Iran conflict could prolong high inflation in the Eurozone. In an interview with the Financial Times, Rehn stated that 'we must show no complacency in the face of these inflationary pressures.'

The conflict between the US and Israel on one side and Iran on the other has pushed up energy prices, contributing to elevated inflation in the Eurozone. Disruptions to shipping through the Strait of Hormuz have also increased costs and offset disinflationary forces.

Analyses show that these disruptions will keep Eurozone inflation elevated through 2026-27, with a risk of stagflation in Europe. This could lead to economic contraction and inflation rising by more than 0.9 percentage points.