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Eurozone Inflation Rises Unexpectedly, With Further Risks on the Horizon

Posted on March 6, 2026 by 2026news

Eurozone inflation picked up unexpectedly in February, and could accelerate further if the rise in energy prices that followed U.S. and Israeli attacks on Iran is sustained.

Consumer prices in the 21-member currency area were 1.9% higher than a year earlier compared with a 1.7% rise in January, the European Union’s statistics agency Eurostat said Tuesday. That was above a consensus of economists polled by The Wall Street Journal, which expected the inflation rate to remain unchanged on month.

The ECB targets an inflation rate of 2%, and forecasts price growth to average 1.9% in the first quarter.

The bank has said it expects consumer prices to average 1.9% this year, and to fall a little further in 2027, before rebounding to target in 2028. At its latest meeting in early February, the ECB voted to keep its key interest rate unchanged at 2%, reiterating that policy remains in a “good place.”

But higher energy prices following the attacks on Iran may push inflation even higher. The price of Brent crude oil, the international benchmark, topped $80 a barrel on Tuesday, and analysts have said prices could hit $100 if the conflict is prolonged. European natural-gas prices have risen more than 75% in the last two days. The price of oil and gas declined over 2025, but began picking up at the start of this year following multiple geopolitical shocks.

However, fresh geopolitical uncertainty could weaken confidence and damp growth, thereby cooling inflation. It could take time before policymakers can discern which of those effects are dominant, and respond.

“Should disruptions to oil markets or key transport routes materialize and become more permanent, this could increase costs and thereby influence inflation in Europe,” said Martin Kocher, head of Austria’s central bank, in an interview. “At the same time, heightened geopolitical tensions can weigh on investment and economic activity.”

While Europe isn’t highly reliant on energy resources from the Persian Gulf region, an increase in global prices for oil and natural gas would ultimately feed through to prices in Europe, regardless of limited physical imports.

Restrictions on gas imports are a particular concern for the bloc, as storage levels currently remain low. On Monday, a drone attack on QatarEnergy’s Ras Laffan gas complex caused European prices to soar.

The European Central Bank has previously said a 14% increase in oil prices could drive an increase in the inflation rate of half of a percentage point. Commerzbank estimates that a prolonged war in the Middle East could raise eurozone price growth by a full percentage point.

Eurozone energy prices, which are heavily influenced by international markets, slipped 3.2% in February compared with a 4% fall in January. Services inflation edged up to 3.4%.

Higher energy prices could prompt the ECB to consider raising interest rates, Point72 economist Soeren Radde said in a note. “In practice, the ECB will be wary of mistaking a very persistent energy price shock for a transient shock.”

But the ECB shouldn’t rush to draw comparisons with a spike in energy prices in 2022, said Guntram Wolff, professor of economics at the Universite Libre de Bruxelles. Russia’s war on Ukraine hit Europe particularly hard due to reduced supplies of natural gas and prolonged uncertainty over sanctions, which don’t apply in the case of Iran, he said.

“For now it’s a temporary shock, and as a central bank you want to look through this. Even if it’s a permanent shock, in the long term it will shuffle consumption away from other areas of demand towards energy use, offering some counterbalancing effect,” Wolff said.

In response to the 2022 spike in energy prices, the ECB raised its key interest rate by four-and-a-half percentage points between July 2022 and September of the following year. Inflation peaked in late 2022, and spent much of last year hovering around the 2% target.

A stronger euro, weak consumer demand and an influx of cheap goods from China have all put downward pressure on prices. https://www.wsj.com/economy/global/eurozone-inflation-remains-below-target-but-risks-loom-3e6bc673?mod=global_more_article_pos1

U.K. Government Sees Debt Plan On Track, But Flags Fresh Uncertainty

Posted on March 6, 2026March 6, 2026 by 2026news

The U.K. government is on track to cut borrowing and reduce its debts, although the attacks on Iran by the U.S. and Israel have made the outlook more uncertain, Treasury Chief Rachel Reeves said Tuesday.

In the first of two annual presentations to lawmakers, Reeves cited new forecasts from the Office for Budget Responsibility that estimate the budget deficit for the fiscal year ending early next month will be 4.3% of annual economic output, the smallest gap between expenditures and revenues since the outbreak of the Covid-19 pandemic.

“The forecasts today confirm that the choices this government has made are the right ones,” Reeves said. “Stability in our public finances, interest rates and inflation falling.”

However, Reeves said the economic outlook has become “yet more uncertain” after the attacks on Iran and its response.

“It is incumbent on me and on this government to chart a course through that uncertainty, to secure our economy against shocks and protect families from the turbulence that we see beyond our borders,” she told lawmakers.

The conflict has raised energy prices, potentially slowing U.K. growth and pushing consumer prices and borrowing costs higher.

“If it persists, it will raise household bills and business costs in the months ahead, putting renewed upward pressure on inflation, and potentially interest rates,” said David Aikman, director of the National Institute for Economic and Social Research.

Even before the attacks, the outlook for the U.K. economy had weakened. The OBR lowered its growth forecast for 2026 to 1.1% from 1.4%.

The OBR’s estimate for this year’s budget deficit is lower than the 4.5% it saw in November. It expects the deficit to fall to 3.6% of economic output in the coming fiscal year, and 2.9% in the following period.

The OBR’s new forecasts indicate that the government is sticking to its self-imposed budget rules, which require that day-to-day spending is paid for out of tax revenues, rather than borrowing, by the fiscal year ending March 2030.

The budget watchdog estimated that in that year, the current budget will be in surplus by 23.6 billion pounds.

The budget rules also require that the stock of debt—measured as public sector net financial liabilities—should be falling by the fiscal year ending in 2030. The OBR estimated debt would be equivalent to 82.2% of economic output in that year, down from 82.9%.

Better news on the deficit had helped lower government bond yields following the November budget. That was helped by expectations that the Bank of England would lower its key interest in the first half of this year.

Over time, lower yields would have translated into reduced interest bills. But much of that progress has been unwound since the attacks on Iran began.

The BOE had expected inflation to settle at its target from April, but higher energy prices raise doubts about that projection. Policymakers may become more cautious, and reluctant to lower borrowing costs until they can be more certain of the likely impact of the new shock.

There is therefore a risk that economic growth and government tax revenues will be lower than the OBR expects, while the interest bill will be higher.

“The conflict in the Middle East has changed the outlook,” said Paul Dales, an economist at Capital Economics. “There is a real risk that government borrowing will be higher.” https://www.wsj.com/economy/u-k-government-sees-debt-plan-on-track-but-flags-fresh-uncertainty-dc54247b?mod=global_news_article_pos5

Swiss Inflation Holds Steady at Low Level as Franc Concerns Swirl

Posted on March 6, 2026 by 2026news

Swiss inflation was unchanged in February close to zero, a worry for the country’s central bank after it voiced increased willingness to intervene in foreign-exchange markets to halt recent gains in the franc.

Consumer prices were up 0.1% compared with February last year, the same rise as in January, Switzerland’s statistics agency said Wednesday. Swiss inflation was last negative in May.

The Swiss National Bank has struggled to limit the appreciation of the franc over the last year as investors have sought a safe haven from the upheaval caused by President Trump’s tariff hikes and innovations in foreign policy. The attacks on Iran over the weekend pushed the franc to its highest level against the euro in more than a decade on Monday.

A stronger franc lowers the domestic prices of imported goods, while also damping demand for Swiss goods abroad, which also cools inflation. The Swiss economy barely grew in the second half of last year after a significant rise in U.S. tariffs hit the country’s exports, which include luxury watches and chemicals.

The SNB has an inflation target of more than zero but below 2%. Central bankers fear periods of deflation, in which falling prices lead businesses and households to hold back on spending in anticipation of securing better deals in the future. This then weakens activity and prices in what can become a vicious circle.

The SNB has limited options to halt the appreciation of the franc. The central bank’s key interest rate is already at zero, and Chairman Martin Schlegel has long stressed there is a high bar to lowering the key rate below zero, underlining the negative impact on savers and the country’s banks.

The central bank could also sell francs to weaken the currency, thereby helping to boost the inflation rate.

In an unusual announcement, the SNB said Monday that its willingness to sell francs has increased.

“We are prepared to intervene in the foreign-exchange market to counter a rapid and excessive appreciation of the Swiss franc, which jeopardizes price stability in Switzerland,” the bank said.

The franc fell back slightly against other currencies after the announcement. However, it did little to dent the gain of more than 14% against the dollar in the past year.

“Such a warning from the SNB is rather rare,” Commerzbank analyst Michael Pfister said in a note to clients.

“For the time being, it is likely that officials have ensured the market will only test stronger franc levels very cautiously, even amid rising geopolitical risks,” he added.

The move could put Switzerland in the crosshairs of the U.S. Treasury, which put the Alpine nation on its watch list for currency manipulation.

Switzerland is due to publish its foreign-currency reserves for February on Friday.

The jump in prices of oil and gas prompted by the conflict in the Middle East could stoke an increase in inflation in the months ahead. More than 70% of energy consumed in Switzerland is imported, according to a 2025 study by the Swiss Energy Foundation.

“A stable currency and potentially higher energy prices, at least in the near term, largely eliminate the risk of the Swiss economy slipping into deflation over the coming quarters,” said Ankita Amajuri, Europe economist at Pantheon Macroeconomics in a note.

Imported-product prices were down 1.6% in February compared with the same month of last year, while domestic inflation was 0.6%, Wednesday’s data showed.

https://www.wsj.com/economy/swiss-inflation-holds-steady-at-low-level-as-franc-concerns-swirl-5e362cfa?mod=global_news_article_pos4

OECD Sees Rising Refinancing Risk as Bond Sales Surge

Posted on March 6, 2026 by 2026news

Governments in rich countries are set to sell a record amount of bonds this year in an increasingly risky environment, while a small number of companies plan to borrow heavily to fund the “enormous” cost of building AI capacity, the Organization for Economic Cooperation and Development said Wednesday.

In its annual report on debt issuance, the OECD said rich-country governments led by the U.S. will have to sell $14.5 trillion in bonds just to replace securities that are maturing, a process known as refinancing. New borrowing will likely bring total issuance to around $18 trillion, an increase of $1 trillion from last year, and a new record.

The increase in refinancing needs partly reflects a shift to selling bonds with shorter maturities, a response to the increased cost of selling longer-dated securities as borrowing surged during the Covid-19 pandemic and in subsequent years.

However, that shift to shorter maturities brings risks. The more often outstanding bonds need to be replaced with new issues, the more vulnerable the government is to a shock that leads investors to temporarily withdraw or demand sharply higher compensation to lend.

“The risk of refinancing may be high, especially in a geopolitical context with a lot of variability,” said Carmine Di Noia, the OECD’s director for financial affairs.

Yields on government bonds have risen sharply since the U.S. and Israel attacked Iran, a move that would increase the cost of refinancing if sustained.

According to the OECD’s figures, the U.S. faces the largest refinancing requirement among its membership, with bond sales equivalent to 31% of gross domestic product in 2025. Japan had the next highest requirement, at 25%, while Italy had the largest in Europe at 16.8%.

The U.S. accounts for an increasing share of total refinancing needs. It was responsible for 70% in 2025, up from 57% in 2020 and just 35% in 2007, the year before the global financial crisis struck.

New borrowing will likely bring total issuance to $18.3 trillion, an increase of more than $1 trillion from last year, and a new record. Governments from developing economies are expected to sell $3.6 trillion in bonds, up from $3.4 trillion last year.

Despite the rapid rise in sales amid increased trade disputes and international conflict, bond markets are “showing few signs of strain,” Di Noia said.

But that could change.

“The resilience debt markets have shown in the face of major pressures should not be taken for granted,” he said. “It rests on a foundation of rigorous monetary policy frameworks, serious commitments to sound fiscal policy, and trust in the integrity of the institutions governing these markets.”

The OECD also expects bond sales by businesses to reach a record high of $6.9 trillion this year, up from $6.8 trillion last year and $4.8 trillion in 2019.

“Given the scale of capital expenditure required to finance the expansion of AI, corporate borrowing needs are expected to continue increasing substantially,” the Paris-based research body said.

That surge in AI-related borrowing could take the corporate bond markets into uncharted territory, with degrees of concentration similar to those seen in equity markets over recent years.

The OECD estimates that nine “hyperscalers” alone are planning capital expenditures of $4.1 trillion between 2026 and 2030, or 36% more than total capital expenditure by all non-financial U.S. companies in 2025.

If half of those investments were financed through bond markets, the OECD calculates the nine would account for issuance of bonds equivalent to 15% of average annual sales by all non-financial businesses globally in the years 2020 to 2025.

“These developments may be setting corporate debt markets on course to become more equity-like,” the OECD said. “Combined with the enormous AI-related financing needs of other sectors, from energy providers to construction companies, AI financing is set to transform these markets.”

Paul Hannon is economics editor for Dow Jones Newswires in London. Paul rejoined Newswires after a decade at The Wall Street Journal, where he was an editor for central banks and reported on the impact of the Covid-19 pandemic on the global economy. https://www.wsj.com/economy/global/oecd-sees-rising-refinancing-risk-as-bond-sales-surge-448ff986?mod=global_news_article_pos3

Eurozone Jobless Rate Hit New Record Low in January

Posted on March 6, 2026 by 2026news

The eurozone unemployment rate fell to a new record low in January, as the bloc continued to show resilience in the face of global uncertainty.

Unemployment in the currency area fell to 6.1% from 6.2% in December, the European Union’s statistics agency Eurostat said Wednesday.

“Overall, these are robust data which will add to the looming hawkish shift at the ECB as inflation risks now seem to be shifting to the upside,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

Across the bloc’s major economies, the decline was driven mainly by falling joblessness in Spain and Italy, he said.

Excluding Bulgaria, which joined the eurozone at the start of 2026, the unemployment rate stood at 6.2%.

“Falling unemployment in Bulgaria of all places…is now helping eurozone joblessness lower,” Vistesen said.

The currency area’s jobless rate is projected to remain relatively stable this year. However, a prolonged attack on Iran by the U.S. and Israel could eventually feed through to employment, as higher energy prices put pressure on businesses.

The figures follow the publication of S&P Global’s purchasing managers’ eurozone survey in late February, which showed companies are reluctant to hire new employees.

In Germany, the bloc’s largest economy, the number of unemployed people fell to just above 3 million in February, with the adjusted rate remaining at 6.3%.

Don Nico Forbes is a reporter for Dow Jones Newswires and The Wall Street Journal, covering European economics. He also writes features on sustainable business. Don joined Dow Jones and the Journal as a publishing editor in 2019. He holds degrees from the University of Manchester and Universitat Pompeu Fabra, in Barcelona. https://www.wsj.com/world/europe/eurozone-jobless-rate-hit-new-record-low-in-january-43a06109?mod=global_news_article_pos2

Eurozone Retail Sales Decline Unexpectedly

Posted on March 6, 2026 by 2026news

Eurozone retail sales fell unexpectedly in January despite a rise in consumer confidence at the start of the year, pointing to fragility in household sentiment even before this week’s surge in energy prices.

Volumes were down 0.1% on month, compared with growth of 0.2% in December, the European Union’s statistics agency said Thursday. A consensus of economists polled by The Wall Street Journal expected a 0.3% rise.

The figure for December was revised up from a 0.5% decline.

The fall in January was driven by lower sales of nonfood products and automotive fuel. Volumes were down 0.9% in Germany, the eurozone’s largest economy, while sales rose in France, Spain and Italy.

This comes despite the bloc showing resilience to rising headwinds at the beginning of 2026. On Wednesday, data showed the eurozone unemployment rate falling to a record low in January. Consumer confidence also picked up in the month, according to figures published last week.

But looking ahead, the outlook is likely to be dragged by rising geopolitical uncertainty and energy prices following U.S. and Israeli strikes on Iran.

“This week’s increase in gas and oil prices may dent confidence a bit and lead to higher household inflation expectations,” said Andrew Kenningham, chief Europe economist at Capital Economics.

Even so, household consumption is expected to rise at a moderate pace this year, he said.

Figures also released Thursday showed the Irish economy contracted much more sharply in the final three months of last year than previously estimated. The country’s statistics agency now calculates that gross domestic product was 3.8% lower than in the third quarter, having previously seen a decline of 0.6%.

That may lead to a reduced estimate for growth in the eurozone as a whole during the period. The European Union’s statistics agency had calculated that the currency area’s economy grew by 0.3%.

While Ireland’s economy experienced a sizable contraction at the end of 2025, it recorded one of the world’s fastest expansions over the year as a whole. The Central Statistics Office said annual GDP was 12.3% higher than in 2024, having previously seen growth of 12.6%, on a surge in exports of weight-loss drugs to the U.S.

Don Nico Forbes is a reporter for Dow Jones Newswires and The Wall Street Journal, covering European economics. He also writes features on sustainable business. Don joined Dow Jones and the Journal as a publishing editor in 2019. He holds degrees from the University of Manchester and.. https://www.wsj.com/business/retail/eurozone-retail-sales-decline-unexpectedly-f6e3b589?mod=global_news_article_pos1

U.A.E. Explores Freezing Iranian Assets to Punish Tehran for Attacks

Posted on March 6, 2026 by 2026news

The United Arab Emirates is weighing freezing billions of dollars of Iranian assets held in the Gulf state, according to people familiar with the discussions, a move that could sever one of Tehran’s most important economic lifelines.

If the U.A.E. goes ahead, it would significantly curb Tehran’s access to foreign currency and global trade networks as its domestic economy, already buckling under inflation, is now engulfed in a military conflict.

Emirati officials have privately warned Iran—which has fired more than 1,000 drones and missiles at targets in the U.A.E.—of the possible action, people familiar with the warnings said. It isn’t clear when, or if, the Emirati government will decide to act.

The Emirati Foreign Ministry didn’t respond to a request for comment.

The U.A.E. has for years functioned as a financial hub for Iranian businesses and individuals seeking a haven from Western sanctions, according to analysts tracking Tehran’s activities and the U.S. Treasury. Iran’s sanctions-evasion infrastructure has allowed Tehran to keep selling oil abroad and use the proceeds to fund weapons programs and regional proxies, they say.

The U.A.E. has previously said it adheres to sanctions and has a strong commitment to protect the integrity of the global financial system.

Any move by the U.A.E. to limit Iranian financial activities there “would be very significant, because the U.A.E. is the most important conduit for Iran’s engagement with the global economy,” said Esfandyar Batmanghelidj, chief executive of Iran-focused think tank Bourse & Bazaar.

U.A.E. authorities are weighing several measures to dismantle illicit Iranian operations, officials familiar with the matter said. They range from freezing the assets of U.A.E.-based shadow companies used to mask trade to a sweeping financial crackdown on local currency exchanges which are used to move money outside of formal banking channels.

If the U.A.E. decides to move on Iran’s shadow-financing empire, a prime target would be accounts affiliated with the Islamic Revolutionary Guard Corps, the powerful group responsible for defending and perpetuating the regime, the officials familiar with the discussions said.

Tehran has allocated a growing portion of its oil for the IRGC, as well as other parts of the defense and security complex, to sell on the international market, according to a Treasury publication last June.

Beyond financial maneuvers, policymakers are also considering direct maritime action, such as seizing Iranian ships, two of the officials familiar with the discussions said. Such moves would be aimed at crippling Iran’s shadow fleet of oil tankers and intermediaries operating across Emirati ports and shipping lanes.

Any efforts to squeeze Iranian assets would mark a sharp departure from the U.A.E.’s historical effort to balance its strategic alliance with the U.S. against its proximity to Iran. Until now, the country has largely refrained from weaponizing its financial sector against its neighbor across the Persian Gulf.

In seeking to become an international financial center, the U.A.E. has welcomed capital from around the world, often with little regard for its provenance. After Russia invaded Ukraine, the U.A.E. was one of the main beneficiaries, playing host to traders of Moscow’s commodities and inviting Russian money and bankers.

The West—including U.S. officials—has previously pressured the U.A.E. to tighten scrutiny on money flows and crack down on sanctions evasion. In 2022, the Financial Action Task Force, a Paris-based global finance watchdog, placed the U.A.E. on its “gray list” for failing to adequately combat money laundering and terrorism financing.

A U.A.E. official has previously told The Wall Street Journal that the U.A.E. had a robust process to deal with sanctioned people and companies and that Emirati banks monitored compliance. In 2024, the Journal reported that Dubai’s main state-owned bank closed some accounts held by Russian oligarchs and oil traders after U.S. officials pressed the U.A.E. to shut Moscow’s backdoor to the international financial system.

Around the same time, the FATF removed the U.A.E. from the list, saying it had strengthened its anti-money-laundering regime.

The latest conflict with Iran has put the U.A.E. in a difficult spot, casting doubt on the country’s carefully cultivated reputation as a haven in a volatile region. Iran’s drone and missile attacks have caused some damage at a Dubai airport, as well as residential and tourist areas around the Burj Al Arab hotel and the Palm Jumeirah man-made island.

Several people involved in the discussions said Emirati officials are weighing the risks of an asset freeze, including the possibility that it could trigger prolonged retaliation by Iran against Emirati territory and its critical energy infrastructure. Such a decision would also upend lucrative trade and banking ties with Tehran and damage the U.A.E.’s ability to attract and retain capital from other politically charged sources, such as Russia.

Any asset freeze is unlikely to cover all accounts held by Iranian companies and nationals, hundreds of thousands of whom live in the U.A.E., analysts said.

Andreas Krieg, a senior lecturer at the School of Security Studies at King’s College London, said that a more targeted approach is more likely because the U.A.E. doesn’t want to lose all of this business. Krieg said that IRGC-linked accounts would be frozen first.

“This is the most important nonmilitary lever the U.A.E. have to play against the Iranians,” Krieg said.

In 2024, $9 billion passing through correspondent accounts maintained by U.S. banks appears to have been tied to clandestine Iranian financial activity, according to the Treasury Department. The Treasury said U.A.E.-based firms received 62% of those funds, much in relation to oil sales by Iran-linked companies in Dubai.

Iran has established front companies in the U.A.E. to receive payments for oil, settle trades and disguise the origin of funds, according to the Treasury and analysts tracking Tehran’s activities.

Iran has also maintained a shadow fleet of aging ships that move sanctioned oil, often trying to disguise their location and ownership. Most of the shadow tankers involved in Iran are owned and managed by companies in the U.A.E. and Asia, according to the Treasury. https://www.wsj.com/world/middle-east/u-a-e-explores-freezing-iranian-assets-to-punish-tehran-for-attacks-904503de?mod=WSJ_home_mediumtopper_pos_1