Iran War Keeps Inflation Elevated Across Europe as Energy Costs Linger

Spain's annual inflation rate held at 3.2 percent in May, the third consecutive month at that level, Euronews reported, confirming preliminary figures from the National Statistics Institute (INE). Transport and package holidays pushed prices up while clothing and food fell, and core inflation, which excludes energy and fresh food, rose to about 3 percent.

The stability is partly engineered. Madrid introduced a roughly 5 billion euro package in March that cut value-added tax on electricity, gas, and fuel to protect households from the war-driven rise in energy prices. Economists warn that prices could climb toward 4 percent over the summer as those measures expire and the electricity tax returns to its standard rate.

The damage extends beyond inflation. The Iranian state outlet IRNA, citing the conflict's effect on Britain, reported that the United Kingdom's economy contracted for the first time since last summer in the opening month of the war, citing higher fuel costs, disrupted energy routes, and a weaker services sector. The framing reflects Tehran's view of the conflict, but the underlying direction, a war premium feeding into European prices and output, is consistent across sources.