Headline inflation in the Irish economy remained steady in April even as war in Iran sent energy prices soaring.
The latest Harmonised Index of Consumer Prices (HICP) indicated that prices rose at an annualised rate of 3.6 per cent in April, up by 0.4 per cent since March.
It compares with an annual increase of 2.6 per cent in the HICP for the euro zone in the same period.
The latest estimate of price growth comes at a pivotal moment for the global economy, with conflict in the Middle East threatening a massive energy price shock on a par with that experienced in the 1970s.
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The closure of the Strait of Hormuz due to the conflict between the United States and Iran has halted global shipments of oil and gas through the channel, triggering a sudden surge in energy prices.
Energy prices are estimated to have climbed by 15.5 per cent over the year and by 2.6 per cent in the month.
The collection of prices for April took place between the 13th and 23rd of the month, which means that some fuel prices would have been collected before the extra Government measures on fuel costs were introduced.
Food prices have increased by 2 per cent in the year and by 0.3 per cent in the past month.
Meanwhile, service prices increased by 2.9 per cent over the 12-month period, and by 0.4 per cent in the month.
Excluding energy and unprocessed food, the HICP is estimated to have grown by 2.3 per cent since April last year.
Eurostat will publish flash estimates of inflation from the EU HICP for the euro zone for April on Thursday.
US president Donald Trump on Wednesday urged Iran to “get smart soon” and sign a deal, following days of deadlock in efforts to end conflict amid reports the US would extend its blockade of Iran’s ports.
Tehran has largely blocked all shipping apart from its own from the Gulf through the Strait of Hormuz, a chokepoint for global energy supplies, since the war began on February 28th. This month, the US began blockading Iranian ships.
Oil prices rose nearly 3 per cent on Wednesday, with the Brent contract hitting a one-month high, on concerns that an extended blockade of Iranian ports would prolong supply disruptions.
The World Bank on Tuesday forecast energy prices would surge by 24 per cent in 2026 to their highest level since Russia’s full-scale invasion of Ukraine four years ago, if the most acute disruptions caused by the Iran war end in May.
The Central Bank of Ireland warned last month headline inflation in the Irish economy could double to 4.2 per cent in the coming months if there is a prolonged conflict in the Middle East.
It said the current spike in oil and gas prices would lead to lower growth and higher inflation and that lower-income households would be “disproportionately” impacted.
The bank’s central projection, based on where oil and gas prices were on March 11th, sees inflation averaging 2.9 per cent this year.
However, “a lengthier conflict with significantly more disruption” could see inflation accelerate to 4.2 per cent, with growth in terms of modified domestic demand slowing to 2 per cent as households see their purchasing power squeezed.
