FRANKFURT, May 4 - A quarterly ECB survey of large companies paints a stark picture of the inflationary risks facing the euro area if the conflict in Iran continues for months. Firms responding to the European Central Bank said prolonged disruption to supplies of fuel and critical oil-derived inputs could lead to a renewed surge in inflation similar to the spikes seen after the pandemic and in 2022-23.
The ECB left interest rates unchanged last week, while discussing whether a hike would be needed to counter rising prices. Officials signalled the possibility of beginning to lift borrowing costs in June, and the survey offers fresh context for that deliberation by detailing how corporations are reacting to energy market strains.
Companies in air travel, logistics, chemicals, plastics and packaging reported that they have already put through price increases, in many cases by double-digit percentages, or have announced forthcoming rises. These moves reflect a marked jump in oil prices since the conflict began, according to the survey.
However, the report cautioned that a more generalised pass-through from energy costs to broader consumer prices - the kind of effect most relevant for ECB policy - may unfold more slowly than the rapid escalation seen after Russia's invasion of Ukraine in 2022. The ECB attributed this moderation in part to large firms having taken protective measures against swings in energy costs.
"This hedging should limit the impact somewhat in the short term, as the pass-through of higher energy prices for these firms was less direct, coming mainly or only via smaller, unhedged suppliers seeking higher input prices," the ECB said.
Despite those mitigating factors, the surveyed companies warned that if the conflict is not resolved quickly - and particularly if the Strait of Hormuz remains blocked or if further attacks hit oil and gas infrastructure - the risks to global supplies would be severe. In that scenario firms saw the prospect of shortages not only in fuel but also in many products that require oil derivatives for manufacture, including hydrogen and helium.
The ECB highlighted several factors that, compared with the post-pandemic period, could limit the inflationary impulse. These include weak global demand, notably from China, the absence of an anticipated boom in services spending and lower levels of fiscal stimulus than during the earlier recovery phase.
For the survey, the ECB interviewed 67 non-financial companies, with most responses collected between March 23 and April 1. The results give policymakers a snapshot of corporate pricing behaviour and supply-chain vulnerabilities as they weigh near-term decisions on interest rates.
Key sectors affected by these developments include transport and logistics, chemicals and industrial manufacturing, packaging and areas of the economy using hydrogen and helium as inputs. How these sectors absorb and pass on higher input costs will be central to the broader inflation trajectory the ECB monitors.