German inflation surges to 2.8% in March as Iran war pumps energy prices

30th Mar 2026 12:50

(Sharecast News) - German inflation rose sharply in March, driven by a surge in energy prices caused by the US-Israeli war on Iran.

Prices jumped to an annual rate of 2.8% from 2% on a harmonised basis with the European Union, according to data published by the federal statistics office.

Energy prices were up for the first time since December 2023, surging 7.2% year on year. Food prices edged up by 0.9% year on year and core inflation, which strips out volatile food and energy prices, remained at 2.5%.

Inflation rose to at least 2.5% in four German states in March, driven by energy price shocks.

"This shouldn't be a surprise to anyone. As the war in the Middle East has entered its fifth week and both energy prices and uncertainty remain high," said Carsten Brzeski, global head of macro at ING.

Eurozone inflation for March is due on Tuesday and is expected to hit 2.7%, posing a question for European Central Bank policymakers on how many interest rate rises are needed to stop higher energy bills affecting the costs of other goods and services.

"Oil prices have always been the most important and direct link between geopolitical developments and the real economy. While the war in the Middle East and the blockade of the Strait of Hormuz provide further evidence of shifting geopolitics and will have longer-term implications for the European economy, the rise in energy prices is already very real," Brzeski added.

"In Germany, if gasoline prices remained at their current levels until the end of the year, the loss in purchasing power for consumers would already be larger than in 2022 (when Russia invaded Ukraine)."

Brzeski said traders had started to price in up to four rate hikes this year, but suggested markets were guided by an "overly simplistic reading of the 2022 episode and the narrative that the ECB was far too late reacting to an oil price shock".

In 2022, as Russia launched its unprovoked invasion of Ukraine, the ECB was normalising policy from negative interest rates and quantitative easing after the Covid pandemic.

"With hindsight, the biggest policy mistake was probably the delayed response to an energy price shock that ultimately morphed into a broader inflation surge. Learning from that episode, though, does not mean a rate hike is imminent," he said.

"As long as the energy price shock remains broadly contained - including first‑round knock-on effects - it remains far from certain that the ECB will react at all. For rate hikes to come back to the table, the bank would need to see a rise in inflation expectations and a broadening of inflationary pressures across the economy."

Reporting by Frank Prenesti for Sharecast.com