Iran War Drives Oil Costs Into Europe's September Inflation Data

Spain's harmonised inflation rate hit 5% in September, the steepest reading since February 2023. Faster price growth was also recorded in France and Poland, with energy costs the main driver.

The data come seven months after the Iran war started on February 28. They also follow the European Central Bank's (ECB) second rate increase of the year, delivered weeks earlier.

Fuel Costs Leave Their Inflation Mark Across Europe

Spain's national consumer price index rose 4.9% compared with a year earlier, according to INE. The agency reported that vehicle fuel prices increased this September after falling a year ago, while package holiday prices dropped less than in 2025.

The harmonised rate exceeded the 4.9% median forecast in a Bloomberg survey. That reading pushes Spain further above the ECB's 2% target, which Bloomberg noted strengthens the argument for additional rate increases. Core inflation meanwhile rose to 3.1%, the highest level since March 2024.

In France, harmonised inflation jumped to 3.4% from 2.6% in August, its fastest pace in over two years. It also beat analyst forecasts.

ALERTE – L'inflation grimpe à 3% sur un an en septembre en France, annonce l'Insee. Au plus haut depuis février 2024. pic.twitter.com/MHBKUbhC74

— Infos Françaises (@InfosFrancaises) September 30, 2026

Poland's inflation rose to 4.0% from 3.4%. That pushed it above the central bank's 1.5% to 3.5% tolerance band for the first time since mid-2025.

Transport costs there had already increased 11.2%, driven by higher fuel prices. The National Bank of Poland has kept its benchmark rate at 3.75% since March, according to Bloomberg reporting.

Germany is set to release its national figure on Wednesday, and preliminary data from five key states point to an increase.

Hesse recorded the highest regional reading, with inflation rising to 3.4% from 3.0%. North Rhine-Westphalia and Lower Saxony both climbed to 3.3% from 2.9%.

Bavaria rose to 3.2% from 2.9%, while Baden-Wuerttemberg reached 2.9% from 2.6%. Destatis President Ruth Brand linked August's energy increase to the conflict.

“The rise in energy prices, caused primarily by the war in Iran, was particularly noticeable in the case of motor fuel prices,” Brand said.

Rate Setters From Frankfurt to Sydney Reach for the Brake

The ECB raised its deposit rate to 2.5% on September 10. President Christine Lagarde said policymakers are not committing to a specific rate path.

As of September 29, ECB Watch data showed a 70% probability that the ECB holds at 2.5% on October 29. Traders assigned the remaining 30% to a quarter-point increase to 2.75%.

The outlook changes for the December 17 meeting. A 2.75% deposit rate is the most probable outcome there, at 68.4%, while a move to 3% carries 28.8% odds.

Elsewhere, the Federal Reserve raised rates on September 16, its first increase since 2023. The Reserve Bank of Australia followed on September 29, lifting its cash rate to 4.6%, the highest since 2011. The bank said the Middle East conflict had widened, leaving energy prices well above its August projections.

Eurostat is due to release the eurozone flash estimate on Friday. August's 3.3% reading was already the highest since September 2024, and the ECB's next decision follows on October 29.