The war with Iran pushed annual inflation to 2.5 percent in March in the eurozone, according to preliminary Eurostat data, up from 1.9 percent in February.

The sharp increase in energy prices driven by the conflict is the main driver of inflation. Monthly prices rose by 1.2 percent. The European Central Bank targets annual inflation of 2 percent over the medium term.

Analysts expect inflation could exceed 3 percent if the conflict continues and the Strait of Hormuz remains blocked. The ECB may be forced to postpone planned interest rate cuts, which would add pressure on already indebted eurozone economies.

European stock markets reacted negatively, with the main indices falling between 1 and 2 percent. The euro weakened against the dollar amid concerns about the economic impact of potentially prolonged supply disruptions.