Eurozone Inflation Jumps to 2.5% in March as Middle East War Drives Energy Shock — Portugal Rises to 2.7%

Inflation across the Eurozone accelerated sharply in March, climbing to 2.5% from 1.9% in February — the highest rate in seven months — as the ongoing conflict in the Middle East sent energy prices soaring, according to preliminary data released Tuesday by Eurostat, the EU's statistical office.

The 0.6 percentage point jump marks the first month that fully incorporates the economic effects of the war, which began in late February and has disrupted oil and gas supplies from the region. Energy prices surged 4.9% year-on-year in March, a dramatic reversal from the -3.1% decline recorded in February and the -1.0% decline in March 2025.

Portugal Inflation Rises to 2.7%

Portugal's harmonized inflation rate rose to 2.7% in March, up from 2.1% in February, placing the country roughly in the middle of the Eurozone table. Croatia recorded the bloc's highest inflation rate at 4.9%, while Italy and Cyprus shared the lowest at 1.5%.

Core inflation in Portugal — which excludes volatile food and energy prices — remained stable at 2.0% in March, unchanged from February, suggesting that underlying price pressures have not yet intensified despite the energy shock.

Portugal's inflation trajectory has been closely watched by households and policymakers alike. The country has already seen food prices hit all-time highs earlier this year, and households have faced rising rents and grocery bills that have squeezed real incomes.

Services and Food Prices Remain Elevated

Across the Eurozone, services inflation remained sticky at 3.2% in March (down slightly from 3.4% in February), while food, alcohol, and tobacco prices rose 2.4% (compared to 2.5% in February). Non-energy industrial goods inflation eased to 0.5%, down from 0.7% the previous month.

Energy's 4.9% annual increase was the main driver of the overall acceleration. The European Commission has urged member states to avoid 'discriminatory measures' in their policy responses to rising energy costs, though several governments are already considering temporary fuel subsidies or energy bill caps.

Implications for ECB Policy and Mortgage Holders

The inflation spike complicates the European Central Bank's next moves. The ECB had been on track to continue gradual interest rate cuts after holding rates steady earlier this month, but the March inflation surge may force policymakers to reassess. The ECB has already warned that inflation risks could force further rate hikes if energy-driven price increases prove persistent.

For Portuguese households, the immediate consequence is already visible in mortgage payments. Following the conflict's outbreak, Euribor rates — the benchmark for most Portuguese home loans — spiked, with mortgage holders facing diverging outcomes depending on their loan terms. ECO reported that monthly mortgage payments could rise by up to €17 in April as Euribor rates posted their largest jump in three years.

The March inflation data is preliminary and subject to revision. Eurostat is expected to release the final figures, including detailed breakdowns by country and category, in mid-April.

Portugal's government has so far resisted broad-based energy subsidies, instead focusing on targeted support for vulnerable households and small businesses. Whether that position holds depends on how long energy prices remain elevated — and whether the Middle East conflict shows any signs of de-escalation.