By Don Nico Forbes and Ed Frankl
Spain's inflation rate climbed again in April as tensions in the Middle East continued to drive up energy prices.
Consumer prices were 3.5% higher than a year earlier, an increase in the annual rate of inflation from 3.4% in March, according to EU-harmonized figures published by Spain's statistics agency INE on Wednesday. That marked the highest inflation level since June 2024, and matched consensus estimates from economists polled by The Wall Street Journal.
The inflation rate jumped last month following the outbreak of war in Iran, which sent energy prices skyrocketing across Europe. Prices look set to remain elevated, with uncertainty continuing over the reopening of the Strait of Hormuz, through which roughly a fifth of the world's oil flows. Brent crude oil prices are currently back up above $110 a barrel as talks between the U.S. and Iran remain stalled.
The European Union's statistics agency Eurostat is scheduled to publish inflation figures for the overall eurozone on Thursday, shortly before the European Central Bank meets to decide on interest rates.
The central bank has said it remains willing to act if necessary to keep inflation in check. But the ECB is widely expected to keep rates on hold as it continues to assess the extent to which higher energy prices are feeding through to core inflation.
"There is no easy path back to where we were before this conflict erupted," ECB President Christine Lagarde said in a speech last week.
"Households and firms have just lived through a large inflation shock and may be more sensitive to rising costs. The muscle memory is fresh," she said.
In separate data published Wednesday, the European Commission's economic sentiment indicator this month sank to its lowest point since November 2020, a time when strict pandemic restrictions were hitting consumers and firms.
Lagarde added, however, that higher energy prices and weaker consumer sentiment would weigh on demand, which could limit the extent of price and wage increases.
The central bank has previously said a 14% increase in oil prices could drive a rise in the inflation rate of half a percentage point.
In late March, the Bank of Spain revised up its inflation expectations for this year and next. It now expects consumer prices to rise by an average of 3.0% in 2026 compared with prior expectations of 2.1%. Inflation is seen at 2.5% in 2027, up from 1.9%.
According to the ECB, headline inflation in the eurozone is expected to average 2.6% in 2026, up from 2.1% in 2025 and well above its 2% target.
Economists say a prolonged conflict could see consumer prices peak at 4.8% in 2027, while in a less adverse scenario inflation could fall back to the ECB's 2% target next year.
Write to Don Nico Forbes at don.forbes@wsj.com and Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
04-29-26 0549ET
