Escalating Middle East tensions are sending oil and gas prices on a wild ride, threatening to push inflation up and derail Europe's fragile recovery. Households and businesses alike are bracing for impact.

BRUSSELS, March 23 (Xinhua) -- After years of sluggish growth, Europe entered 2026 hoping for a turnaround. But escalating tensions in the Middle East have sent oil and gas prices on a wild ride, threatening to derail that recovery.

Rising energy costs are set to push inflation higher and cloud the eurozone's growth prospects, leaving households and businesses bracing for a challenging year.

ROLLERCOASTER ENERGY MARKET

The latest bout of turbulence triggered by U.S.-Israeli joint attacks on Iran since Feb. 28 was felt in energy markets on Monday, when oil and gas prices swung sharply amid conflicting signals from Washington and Tehran.

In early trading, Brent crude rose above 113 U.S. dollars per barrel, extending gains to roughly 50 percent since the conflict began, as fears mounted over supply disruptions due to the effective closure of the Strait of Hormuz, a key route for global oil shipments.

Prices then dropped after U.S. President Donald Trump said he had held "very good and productive" talks with Iran and ordered a five-day delay on planned strikes against Iranian energy infrastructure. Brent crude fell more than 10 percent to below 100 dollars per barrel.

However, the decline was short-lived over Iran's denial of any negotiations. Oil prices rebounded to around 105 dollars per barrel before easing again to near 101 dollars in afternoon trading.

European gas prices showed a similar pattern of volatility. Benchmark Dutch TTF futures rose to above 63 euros (73 U.S. dollars) per megawatt-hour in early trading. Following Trump's remarks, prices dropped to around 54 euros (63 dollars), before recovering to about 59 euros (68 dollars) after Iran's response. Prices later eased again to around 55 euros (64 dollars) in afternoon trading.

With Brent crude as Europe's key oil benchmark, volatility in crude markets has been filtering through to retail fuel prices for nearly a month, leaving households across Europe to bear the brunt of the conflict through steadily rising fuel and energy costs.

"From the very first day the war began, we have seen price increases on refinery invoices. Every day, each new invoice is higher than the last ... this new increase on the invoice eventually reaches consumers. People are complaining," Maria Zagka, president of the Attica Gas Station Owners' Association and spokesperson for the Hellenic Federation of Gas Station Owners, told Xinhua.

HIGHER GROCERY BILLS

The energy shock is no longer confined to oil and gas markets. Across Europe, higher fuel costs are beginning to spill over into the prices of everyday goods, raising the risk that a prolonged energy squeeze could broaden into wider consumer inflation.

Researchers say the impact is already felt most acutely in energy-intensive products such as baked goods, dairy products and processed foods, while goods with long supply chains also becoming more expensive.

Bulgaria's State Commission on Commodity Exchanges and Markets has already reported rising wholesale prices for most products, with particularly sharp increases of 11-19 percent in prices of apple, tomato and banana last week. Prices of onion, pepper, cabbage and rice have also moved higher, alongside lemon, beans and lentils.

Prices of grain, corn, soy, rice and meat could also rise, Samina Sultan of the German Economic Institute told German news agency dpa, citing high fertilizer costs and noting that soy and corn are widely used as animal feed.

The latest report by the German Institute for Economic Research (DIW) said that higher energy costs are expected to push inflation in Germany up by around 0.4 percentage points in 2026 compared with earlier projections.

David Bharier, head of research at the British Chambers of Commerce, believes the ongoing conflict could derail recent progress in bringing inflation under control in Britain.

"Our latest economic forecast suggests inflation is likely to reach 2.7 percent by Q4 2026, and we anticipate no further rate cuts in the near term. That's concerning news for businesses looking to borrow as a springboard for investment and growth," Bharier said.

GRIM ECONOMIC OUTLOOK

Europe entered 2026 hoping that a long-awaited recovery might finally take hold after years of subdued growth. But that outlook has dimmed sharply now.

In its March 2026 staff projections, the European Central Bank said growth expectations had improved through much time last year and the economy had carried positive momentum into the start of 2026, but warned that the war in the Middle East had clouded the outlook again.

The fallout is already forcing governments and economists to reassess the year ahead.

Luis Montenegro, prime minister of Portugal, acknowledged last week that Portugal may run a deficit in 2026 due to the "exceptional circumstances" linked to the impacts of storms and the energy crisis.

In Germany, Europe's largest economy, the DIW projects that the German economy will grow by 1 percent and 1.4 percent in 2026 and 2027, down by 0.3 and 0.2 percentage points from earlier projections respectively.

Economists are also becoming more cautious on the overall eurozone growth outlook. Franziska Palmas, senior Europe economist at Capital Economics, said eurozone growth was likely to slow dramatically, though the bloc would probably still avoid a recession, with two quarters of stagnation this year followed by only a gradual recovery.

Carsten Brzeski, global head of macro at ING Research, struck a darker note, saying that in a severe scenario, higher energy prices could cut eurozone growth by 0.5 percentage points in 2026 and 0.4 percentage points in 2027, pushing the economy into a technical recession in the summer of 2026 while also driving inflation significantly above baseline projections.