NEW YORK (AP) — Oil prices are surging again as the Russia-Ukraine conflict continues, pushing crude up to $110 a barrel.
Eurozone inflation soared in February to a record high of 5.8 percent, mainly on the back of surging energy prices, the EU’s official statistics agency Eurostat said Wednesday.
The acceleration, from 5.1 percent in January, was announced as oil and gas prices rocketed even higher over fears about the impact on supplies from the conflict.
Brent crude topped $110 a barrel for the first time since 2014 and WTI followed suit hours later to hit the highest level since 2013. European natural gas prices similarly hit a record level.
The surge in inflation comes at a difficult time for European leaders as they warn their citizens of the “price to pay” from tough sanctions imposed on Russia, the EU’s leading foreign gas supplier.
Policymakers fear soaring inflation could choke off the EU’s recovery from the coronavirus pandemic.
Eurostat said energy prices in February jumped 31.7 percent, faster than the 28.8 percent recorded in January.
Food prices were up 4.1 percent in February, compared with 3.5 percent the previous month.
Analysts at Capital Economics predicted inflation would hit six percent in the coming months before falling back to around four percent, “most likely” at the end the year.
That is still double the European Central Bank’s target of around two percent.
Capital Economics warned that not only energy prices, but also food prices could rise further due to the conflict in Ukraine, a major wheat exporter.
The EU and Western allies have imposed sweeping sanctions on Moscow over President Vladimir Putin’s order for a “special military operation” inside Ukraine.
Higher energy prices could worsen the inflation that’s already threatening economies everywhere and prompting concern among central banks.
U.S. Federal Reserve Chair Jerome Powell told Congress in testimony Wednesday morning that the Fed is ready to begin a cycle of interest rate increases this month in an effort to fight back inflation.
In prepared testimony, Powell cautioned that the financial consequences of the Ukraine crisis are “highly uncertain” and that the Fed will “need to be nimble” in responding to unexpected changes resulting from the war or the sanctions that the United States and Europe have imposed in response.
Markets in Shanghai and Tokyo declined as the conflict fed fears of global economic turmoil.
The war is adding to worries