Eurozone companies see a risk of a new inflation spike similar to the one after the COVID-19 pandemic if the war in Iran continues for months and disrupts supplies of fuel, hydrogen and helium. This is according to a survey by the European Central Bank, reports "Reuters".
Last week, the European Central Bank left interest rates unchanged but discussed raising them to combat rising inflation and signaled that it could start increasing borrowing costs in June.
The ECB's quarterly survey of large companies found that those operating in the air transport, logistics, chemical, plastics and packaging sectors had already raised their prices - often by double digits - or had announced increases, reflecting the surge in oil prices since the start of the conflict.
A broader pass-through to other prices, which is more in line with ECB policy, is likely to be more gradual than during Russia's invasion of Ukraine in 2022, as large companies have hedged against fluctuations in oil prices. energy.
"This hedging should limit the impact somewhat in the short term, as the pass-through of higher energy prices to these firms was less direct and came mainly or only through smaller, unhedged suppliers seeking higher input prices," the ECB explained.
If the war and the related disruptions in the Strait of Hormuz are not resolved soon, however, companies see a risk of another spike in inflation similar to that seen in 2022-23, the ECB said.
"A conflict lasting months rather than weeks - with the Strait of Hormuz still blocked and/or further attacks on oil and gas infrastructure - would lead to global shortages not only of fuel but also of many products requiring oil derivatives for their production," the ECB said, citing hydrogen and helium.
As mitigating factors compared to the post-pandemic period, the bank cited weak global demand, especially from China, the lack of an expected boom in services and the lower level of economic stimulus from fiscal spending.
For its study, the ECB surveyed 67 companies outside the financial sector, mainly between March 23 and April 1.