G7 pledges action as energy crisis drives inflation surge in Europe

Monday 30 March 2026 - 17:30

By: Dakir Madiha

G7 pledges action as energy crisis drives inflation surge in Europe

Finance and energy ministers from the Group of Seven met virtually on Monday alongside central bank governors as Europe faced mounting economic pressure from the energy shock linked to the conflict involving Iran. New data showed German inflation rising to its highest level in over a year, underscoring the scale of the crisis.

In a joint statement issued after the meeting, the G7 said it stands ready to take all necessary measures to ensure stability and security in energy markets, according to Kyodo News. Japan’s industry minister Ryosei Akazawa said preparations are underway for a possible coordinated release of additional strategic oil reserves. The International Energy Agency has already begun releasing more than 400 million barrels this month, marking the first joint action of this scale since Russia’s invasion of Ukraine in 2022.

Germany reported a sharp increase in inflation. Preliminary data from the federal statistics office showed annual inflation rising to 2.7 percent in March from 1.9 percent in February, driven by a 7.2 percent jump in energy prices. The harmonized consumer price index, closely monitored by the European Central Bank, reached 2.8 percent, well above the bank’s 2 percent target.

Economists expect eurozone inflation data due Tuesday to confirm a similar trend. Forecasts point to a 2.7 percent annual rate, up from 1.9 percent the previous month and the highest level in more than two years, according to Trading Economics. The ECB’s March projections already anticipated average inflation of 2.6 percent in 2026, with a peak of 3.1 percent expected in the second quarter.

Rising prices have spilled into bond markets. Germany’s 10-year Bund yield climbed above 3 percent last week, its highest level since 2011. French government bond yields reached levels last seen in 2009, according to CNBC. The Bund is on track for its steepest monthly increase since December 2022.

Markets are now pricing in three interest rate hikes of 25 basis points by the European Central Bank by September, which would lift the deposit rate from 2 percent to 2.75 percent, according to RTE. Major institutions including JPMorgan, Morgan Stanley, and Barclays have revised forecasts to reflect tighter policy this year.

ECB President Christine Lagarde said policymakers are prepared to raise rates even if the inflation spike proves temporary. Analysts note that February inflation data did not yet reflect the full impact of escalating tensions in the Middle East, suggesting further price pressures may still emerge.