Inflation in the euro zone jumped to 2.5% in March, according to the latest preliminary figures from Eurostat on Tuesday.

Euro zone inflation was up from 1.9% in February and jumped well ahead of the European Central Bank’s 2% target.

The increase largely reflects a sharp jump in energy prices since the U.S. and Israel launched their military operation against Iran at the end of February. Economists polled by Reuters had expected a reading of 2.6%.

Eurostat said the energy component of the inflation data was expected to have risen to 4.9% in March, compared with -3.1% in February. Inflation was also driven by services (3.2%, compared with 3.4% in February), and food, alcohol & tobacco (2.4%, compared with 2.5% last month).

ECB President Christine Lagarde said last week that the central bank was watching regional data closely and would respond with interest rate hikes if necessary, even if a surge in inflation proved to be short-lived.

The central bank has already revised its growth and inflation forecasts for the medium-term and now expects economic growth of 0.9% in 2026, with headline inflation averaging 2.6% for the year.

The inflation print is the latest evidence of a looming downturn for the euro zone, with economic sentiment, consumer confidence, employment expectations and private sector output growth all hit by the outbreak of the Iran war — a conflict Europe sees as a U.S.-led war of choice, rather than necessity.

Iran’s almost total closure of the Strait of Hormuz, a vital maritime passage for a fifth of the world’s oil and gas exports, has caused global energy prices to surge.

Europe is particularly vulnerable to energy price shocks given its significant reliance on gas and oil imports. The latest supply crunch also comes as the continent is boosting efforts to wean itself off Russian gas.

It has left Europe competing with other nations for liquefied natural gas (LNG) supplies.

Imports from the U.S., Europe’s top LNG supplier, accounting for almost 58% of imports last year, tripled between 2021 and 2025, European data shows.

The euro zone’s latest inflation data should act as a warning to other Western economies of what’s to come, Joshua Mahony, chief market analyst at Scope Markets, said Tuesday.

“The rapid rise in euro zone inflation points towards a second wave of price pressures that are only just beginning to take hold. Notably, we have already energy switch roles from being a key driver of disinflation, to the become the key driver of above-target inflation,” he noted in emailed analysis.

“For the central bankers, the task ahead is to ascertain whether this is simply something that they can look beyond or a driver of higher rates to come,” he added.