Energy Prices Push Eurozone Inflation Up

Eurozone inflation increased slightly in July after energy prices climbed due to the war in the Middle East, official data showed on Friday. 

Consumer price rises in the single currency area accelerated to 2.9 percent this month from 2.8 percent in June, the EU’s statistics agency said, in line with predictions by analysts for Bloomberg.

The figure is still well above the European Central Bank’s two-percent target, and ECB chief Christine Lagarde warned last week that the energy shock from the US-Iran war “could intensify further”.

The ECB on July 23 kept its key deposit rate unchanged but opened the door to a rise in September as fresh fighting in the Middle East threatens to send prices higher.

The United States and Iran traded new military attacks this month, but mediator Pakistan insisted on Thursday negotiations between the two sides are ongoing. Of particular importance for the ECB, core inflation - which strips out volatile energy and food prices - accelerated slightly to 2.5 percent in July after slowing to 2.4 percent last month.

Friday’s data published by Eurostat also showed energy prices rose by 10 percent in July, up from 8.5 percent in June. But food and drinks inflation slowed to 1.2 percent this month, down from 1.5 percent last month.

Meanwhile, Germany’s jobless rate rose unexpectedly in July to 6.4 percent “mainly owing to seasonal factors” against a backdrop of weak labor market momentum, the federal employment agency BfA said Friday.

Analysts polled by Factset had forecast a figure of 6.3 percent, as per the previous two monthly readings. Less representative but widely publicly discussed raw data showed the number of jobless rising 71,000 across July to surpass the three million mark for the first time since May.

Seasonally adjusted figures showed the number as up by 6,000. “Unemployment and underemployment rose significantly in July, mainly for seasonal reasons,” said agency executive board member Daniel Terzenbach.

He added the holiday period and the end of vocational training programs for young people were also partially to blame for the rise, while adding that tepid labor market demand was not helping jobless find work.

Compared with July last year 28,000 more people are currently without employment, the BfA said. “Without reforms, the turnaround in the labor market will not happen,” said the German Engineering Federation VDMA, urging “work be made more attractive and the burden on businesses be eased”.

In the second quarter of 2026, German GDP proved more resilient than forecast, rising 0.2 percent despite the war in the Middle East and the closure of the Strait of Hormuz, which spawned an energy crisis in the eurozone.

In another development, French consumer prices rose by 2.1 percent year-on-year in July, after June brought a 1.8 percent increase, driven by higher prices for services and energy, statistics body INSEE reported Friday.

NSEE said its provisional estimate for the Harmonized Index of Consumer Prices (HICP), which allows comparisons between euro-zone countries, rose by 2.4 percent year-on-year in July, following a 2 percent rise in June.

“This rise in inflation remains contained, in line with the figures for June, and comes against a backdrop of growth reaching +0.2 percent in the second quarter,” the finance ministry said.