{"id":326628,"date":"2026-03-03T12:31:09","date_gmt":"2026-03-03T12:31:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/326628\/"},"modified":"2026-03-03T12:31:09","modified_gmt":"2026-03-03T12:31:09","slug":"lengthy-iran-war-could-cause-inflation-spike-warns-ecbs-top-economist-philip-lane-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/326628\/","title":{"rendered":"Lengthy Iran war could cause inflation \u2018spike\u2019, warns ECB\u2019s top economist Philip Lane \u2013 The Irish Times"},"content":{"rendered":"

Prolonged war in the Middle East and a persistent fall in oil and gas supplies from the region could cause a \u201csubstantial spike\u201d in inflation and a \u201csharp drop in output\u201d in the euro zone, the European Central Bank<\/a>\u2019s chief economist has warned.<\/p>\n

In an interview with the Financial Times, Philip Lane<\/a> said that \u201cdirectionally, a jump in energy prices puts upward pressure on inflation, especially in the near term\u201d, and that such a development would be \u201cnegative\u201d for growth.<\/p>\n

European gas prices shot up almost 50 per cent at one point on Monday, after Qatar halted liquefied natural gas production following strikes from Iran<\/a>, which has come under attack from the US and Israel since Saturday.<\/p>\n

Oil prices increased almost 7 per cent to $77.74 a barrel because of a near-complete halt of shipments through the Strait of Hormuz, the strategic seaway through which roughly a fifth of the world\u2019s oil and LNG flows.<\/p>\n

The magnitude of the shock from the Middle East would depend \u201con the breadth and duration of the conflict\u201d, Lane said. He added that \u201cthe impact would be amplified if it also gave rise to a repricing of risk in financial markets\u201d.<\/p>\n

The ECB \u201cwill be closely monitoring developments\u201d, Lane said. He cited a scenario analysis it published in December 2023 that highlighted \u201ca substantial spike in energy-driven inflation and a sharp drop in output\u201d if a conflict in the Middle East led to a \u201cpersistent drop in energy supplies\u201d as well as \u201cdisruptions in regional economic activity\u201d.<\/p>\n

In the analysis, the ECB modelled a third of the oil and gas transiting the Strait of Hormuz was disrupted. In such a scenario, its economists estimated oil prices, which at the time were roughly $80 a barrel, would rise more than 50 per cent to about $130 a barrel. Growth in the euro zone would be 0.6 percentage points lower in the subsequent year, they said, while inflation would be more than 0.8 points higher.<\/p>\n

Prior to the war, ECB economists had predicted annual inflation would fall slightly below the central bank\u2019s 2 per cent target between the second quarter of this year and the end of 2027, before returning to 2 per cent in 2028.<\/p>\n

Investors currently see an 88 per cent chance that the ECB will leave interest rates unchanged at 2 per cent this year, according to Reuters data.<\/p>\n

Lane said he does not see any reason to change the central bank\u2019s stance: \u201cI think where we are now is OK.\u201d<\/p>\n

Barring a big and lasting shock from the Middle East, the euro zone economy was \u201cgrowing in the neighbourhood of its potential\u201d, Lane said, adding he does not see meaningful risks of overheating.<\/p>\n

\u201cIn 2023 and 2024, growth was below potential. There is still spare capacity, particularly in manufacturing,\u201d he said, adding \u201cwe would need a period of above-potential growth in order to run that down\u201d.<\/p>\n

He also stressed that inflation, excluding volatile energy prices, was still higher than the ECB\u2019s medium-term 2 per cent target and compensation per employee late last year was slightly higher than expected.<\/p>\n

\u201cThis is not an environment where I see an argument in favour of taking a bit of risk on inflation,\u201d he added. – Copyright The Financial Times Limited 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Prolonged war in the Middle East and a persistent fall in oil and gas supplies from the region…\n","protected":false},"author":2,"featured_media":326629,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,12965,61,11829,60,150432,26698],"class_list":["post-326628","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-european-central-bank-ecb","tag-ie","tag-iran","tag-ireland","tag-israel-iran-conflict","tag-philip-lane"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/326628","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=326628"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/326628\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/326629"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=326628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=326628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=326628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}