The euro zone's annual inflation rate rose to 3.2% in May, marking another increase in consumer prices as elevated energy costs continued to ripple across the region.
The latest flash estimate showed inter-annual inflation accelerated from 3% in April, leaving price growth well above the European Central Bank's 2% target. Energy remained the biggest contributor to inflation, with prices rising 10.9% year over year in May, according to preliminary data released by Eurostat and reported by CNBC.
European economies continue to grapple with higher oil and natural gas prices following the outbreak of the U.S.-Iran conflict, which has disrupted energy markets and increased concerns about supply stability. Europe remains particularly vulnerable to energy price shocks because it imports a large share of its energy needs.
Services inflation also accelerated during the month, rising to 3.5% from 3% in April, according to the data. Meanwhile, inflation for food, alcohol and tobacco eased to 2% from 2.4% a month earlier.
Additional data released Tuesday showed underlying price pressures also strengthened. Core inflation, which excludes volatile food and energy prices, rose to 2.5% from 2.2% in April, according to Reuters.
Inflation trends differed considerably across the euro area's member countries. Germany, the bloc's largest economy, recorded an annual inflation rate of 2.7% in May, down from 2.9% in April. France's inflation rate increased to 2.8% from 2.5%, while Greece and Lithuania both recorded annual inflation rates above 5%.
The latest increase extends a recent upward trend in euro-area inflation. Eurostat data showed inflation had already climbed to 3% in April from 2.6% in March after spending several months closer to the ECB's target. Energy contributed nearly one percentage point to overall inflation across the euro area in April, according to Eurostat.
Financial markets closely watched Tuesday's release ahead of the European Central Bank's next policy meeting. Markets were pricing in a strong likelihood of a 25-basis-point interest rate increase later this month, according to LSEG data.
Following the inflation report, the euro traded little changed against the U.S. dollar at around $1.164, while Germany's benchmark 10-year government bond yield moved lower.
Economists said the data reflected the continuing impact of higher energy costs on the euro-area economy. Carsten Brzeski, global head of macro at ING, said the latest figures showed the energy shock linked to the Iran conflict had become more persistent, according to the CNBC report.
Eurostat's flash estimate showed the euro area's Harmonized Index of Consumer Prices rose 0.1% on a monthly basis in May. Alongside energy and services, non-energy industrial goods recorded annual inflation of 0.9%, up from 0.8% in April, according to Eurostat's preliminary figures.
The euro area expanded to 21 member countries at the start of 2026 with the addition of Bulgaria, and Eurostat's inflation calculations now reflect the enlarged currency bloc.
