Euro Zone Firms Warn of Fresh Inflation Risks if Iran War Drags On

FRANKFURT, May 4, 2026 — Large companies across the euro zone are warning that inflation could surge again if the war in Iran continues for months and keeps disrupting key energy and industrial supply routes, according to a European Central Bank survey reported by Reuters.

ECB Survey Points to Renewed Price Pressure

The ECB’s quarterly survey of major non-financial companies found growing concern among businesses that a long conflict could trigger fresh cost increases across Europe. Firms in air travel, logistics, chemicals, plastics, and packaging have already raised prices or announced increases, with some hikes reaching double-digit levels.

The main concern is the sharp rise in oil prices since the conflict began. Energy costs affect not only fuel bills but also shipping, manufacturing, packaging, and many everyday goods. If those costs stay high, companies may pass them on to consumers.

Strait of Hormuz Disruption Is a Key Risk

Companies told the ECB that a prolonged disruption in the Strait of Hormuz could create shortages of fuel and important industrial materials. The waterway is one of the world’s most important energy shipping routes, so any blockage can quickly affect global supply chains.

The ECB said a conflict lasting months, rather than weeks, could lead to shortages beyond oil and gas. Products that depend on oil derivatives, hydrogen, and helium could also face supply problems, making production more expensive for many industries.

Inflation Impact May Be Slower Than in 2022

Even so, the ECB noted that the inflation shock may not spread as quickly as it did after Russia’s invasion of Ukraine in 2022. Many large companies have hedged against energy price swings, meaning they have protection against sudden price jumps.

However, smaller suppliers may not have the same protection. If those suppliers face higher costs, they could raise prices for larger firms, slowly pushing inflation through the broader economy.

ECB Policy Outlook Becomes More Difficult

The warning comes after the ECB left interest rates unchanged last week. Policymakers discussed whether a rate hike may be needed to fight rising inflation and signaled that borrowing costs could increase in June.

For the ECB, the challenge is balancing inflation control with economic growth. Higher interest rates can cool prices, but they can also make loans more expensive for households and businesses.

Weak Demand Could Limit the Damage

The ECB also pointed to several factors that may reduce the inflation threat. Global demand remains weak, especially from China. Europe is not expecting a major services boom, and government spending support is lower than during the post-pandemic period.

These conditions may stop inflation from spreading as widely as it did in 2022 and 2023. Still, companies remain cautious because energy shocks can move quickly through supply chains.

What This Means for Consumers

If the conflict continues, consumers in the euro zone could face higher prices for air travel, transport, packaged goods, chemicals-based products, and energy-related services. Businesses may try to absorb some costs, but long-lasting pressure would make that harder.

The ECB interviewed 67 major companies outside the financial sector, mainly between March 23 and April 1. Their responses show that European firms are preparing for a period of uncertainty as geopolitical risks again threaten price stability.

Conclusion

The latest ECB survey shows that euro zone firms are worried about a new inflation wave if the Iran war lasts for months. While hedging and weaker demand may soften the impact, prolonged disruption to fuel and industrial supplies could push prices higher across several sectors. The ECB now faces a tougher policy path as it watches both inflation risks and economic weakness.

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