Europe Brief: Eurozone Inflation Surges to 2.5% as UK Diesel Rises 40p in a Month
Eurozone inflation hits 2.5%. UK diesel up 40p. Netherlands gas at 6%. Slovenia rations fuel. UK food inflation to hit 8%. Germany-France power gap at record.
Europe is now firmly in the grip of its worst energy crisis since 2022. Eurozone inflation just hit 2.5% — its fastest monthly jump in over three years. UK diesel has risen 40p per litre in a month. The EU is dusting off emergency measures it hoped to never use again. And Germany's new chancellor warned the economic fallout could rival Covid.
Commodity snapshot (as of March 31)
- Brent crude: $105.13/barrel (retreating from $115+ on ceasefire hopes)
- European gas (TTF): exceeded EUR 55/MWh — up 70%+ from pre-crisis levels
- Eurozone inflation: 2.5% (highest monthly pace since Oct 2022)
- UK diesel: up 40p/litre in under a month; full tank now exceeds £100
- UK heating oil: 104.1p/litre — nearly double February's 53.5p, highest since records began in 1989
Eurozone inflation surges past ECB target
Consumer prices jumped at their fastest monthly pace since October 2022, driven almost entirely by the energy shock from the Iran conflict. Eurozone inflation hit 2.5%, breaching the ECB's 2% target and raising the spectre of rate hikes just as growth is stalling. Economists are split on whether Frankfurt will raise rates — tightening would fight inflation but deepen the economic slowdown. The Netherlands, Belgium, and Germany are most exposed to food price inflation driven by higher energy and fertilizer costs.
UK diesel up 40p, rationing plans on the table
UK diesel prices have surged 40p per litre in under a month. The government is reviewing emergency petrol and diesel rationing plans for the first time since the 1970s, including a potential £30 cap per fill-up. Priority access plans are being drawn up for emergency services, healthcare, and food distribution. Some pump closures have already occurred, though Downing Street insists fuel supply is "flowing normally." PM Starmer hosted a roundtable with insurance, oil, gas, and shipping bosses as the crisis entered its fifth week. One headline put it starkly: the last tankers loaded before Hormuz closed are arriving next week — after that, Britain is on its own.
EU revives 2022 crisis playbook
The European Union is considering reviving the energy crisis measures it deployed in 2022 when Russia slashed gas deliveries. The bloc's energy chief said the measures — including coordinated demand reduction and emergency gas purchasing — may be necessary to address the unfolding disruption. The EU formally called on member states to curb oil demand and prepare for prolonged disruption. European gas storage has fallen to an average of just 28% — with the Netherlands at a record-low 6% and Germany at a record-low 22%. Slovenia became the first EU country to implement fuel rationing. The EU lowered minimum gas storage targets from 90% to 75% on March 20 to avoid panic buying, but the refilling season ahead looks brutal with Asian buyers competing for the same LNG cargoes.
Germany warns of Covid-level economic fallout
Chancellor Friedrich Merz warned the economic fallout from the Iran war is on track to rival that of the Covid pandemic or the Russian invasion of Ukraine. Germany's energy-intensive industrial sectors — chemicals, steel, manufacturing — are buckling under cost pressure. The EU is urging Europeans to travel less as fear of energy shortages increases, mirroring the Asian work-from-home and fuel conservation orders.
Airlines slash flights as jet fuel surges 80%
The Gulf supplies about 50% of Europe's aviation kerosene imports. Jet fuel prices have surged over 80%, forcing airlines to cut routes and hike fares dramatically. Summer 2026 airfares are spiking sharply on long-haul routes to Africa, Asia, and within Europe. Routes avoiding Middle East and Gulf stopovers face surging demand, compounding the price pressure. JetBlue announced baggage fee increases, and analysts expect other carriers to follow. The aviation industry is calling it a "perfect storm" of supply constraints and demand shifts.
UK grocery bills set to surge — food inflation could hit 8%
The IGD (Institute of Grocery Distribution) forecasts UK food inflation could reach over 8% by June 2026, potentially adding more than £150 annually to average household grocery bills. This echoes the 2022 crisis where UK retail food inflation peaked at 19.1%. Analysts warn the damage will be long-lasting: even with a quick resolution, fertilizer shortages will affect next year's harvest, meaning food price increases could persist into 2027. UK drivers have already paid £544 million extra for fuel since the conflict began. NHS England's head said health bosses were "really worried" about supply chain impacts on medical supplies — syringes, gloves, and IV bags.
Markets rally on Trump's exit signals
European markets rose alongside a massive Wall Street rally after Trump said the US could end its military campaign in Iran within two to three weeks. However, the gains do little to offset one of the worst monthly and quarterly performances in years. Oil retreated to $105 from highs above $115, but remains far above the $72 level at the start of March. German inflation hit 2.8% in March — the highest in more than a year. The Germany-France electricity price gap hit a record, with German power prices trading at roughly four times the level in France, reflecting Germany's heavy gas dependence versus France's nuclear fleet.
What to watch
Trump's national address on Wednesday could reshape the conflict trajectory. Pakistan is set to host US-Iran talks. But Europe's immediate problem is physical: the fuel and gas in transit right now is the last pre-closure supply. Shell's CEO warned shortages could hit Europe in April, and April starts tomorrow. The ECB must decide whether to hike rates into a stagflationary environment — a decision that could define Europe's 2026.
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