Rising Fuel Prices Could Force Excruciating Choices on Economic Policies

War in the

Middle East

U.S.-Iran Talks

Israel-Lebanon Truce

Strait of Hormuz

Enriched Uranium

Timeline of War

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Rising Fuel Prices Could Force Excruciating Choices on Economic Policies

The European Central Bank and Bank of England were expected to hold interest rates steady on Thursday while searching for signs of possible longer-term damage.

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A gas station in Paris. The war in Iran had an almost immediate impact on European inflation, increasing gasoline prices as well as airfares and other fuel-intensive activities.

Credit...

Violette Franchi for The New York Times

By

Eshe Nelson

Reporting from London

April 30, 2026,

12:01 a.m. ET

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With the flow of energy through the Middle East still mostly blocked and oil prices rising, policymakers in Europe are confronting the immediate impact of higher costs and trying to decipher the potential economic damage of a prolonged conflict.

On Thursday, officials at the European Central Bank and Bank of England are expected to hold interest rates steady, but investors are betting that each central bank will raise rates at least twice later this year. Economists and lawmakers will be watching closely for signs about how the central banks will respond to jumps in inflation.

The effective closing of the Strait of Hormuz, a vital waterway for fuel and other commodities off Iran’s southern coast, has sharply increased energy prices. Brent crude, the international benchmark, has pushed well above $100 a barrel, while European natural gas prices are nearly 40 percent higher since the United States and Israel attacked Iran at the end of February.

The war had an almost immediate impact on European inflation, increasing gasoline prices at the pump, airfares and other fuel-intensive activities. In Britain, the annual inflation rate climbed to 3.3 percent in March and is expected to stay around 3 percent through the second quarter, a percentage point above the central bank’s target. For the 21 countries that use the euro, inflation averaged 2.6 percent in March, up from 1.9 percent a month earlier.

But for the central banks, the question is whether higher prices will ripple through the economy and eventually push up wages, potentially setting off a spiral of escalating prices that would warrant aggressive rate increases like those in 2022. For now, analysts say there isn’t enough information on how the war, seemingly in a

holding pattern

, will affect the economy. While President Trump has extended a cease-fire in the region, traffic through the strait remains sparse.

At the same time, the concern about inflation is being weighed against the possibility that the war damages economic growth. In that scenario, policymakers wouldn’t want to tighten financial conditions. Consumer sentiment in Germany, the eurozone’s largest economy, dropped to its lowest level in three years, data this week showed. This month, the

International Monetary Fund

said the bloc’s economy would grow 1.1 percent this year, but that assumed a relatively quick resolution to the war and the recovery of global energy markets.

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