Rising wholesale natural gas prices are now feeding through to end consumers in the eurozone more quickly and showing up faster in consumer inflation, according to the European Central Bank’s Economic Bulletin. ECB economists said that in most euro area countries the impact can now appear in inflation data within one to three months.
At the same time, the central bank said pressure on electricity prices in 2026 has so far been lower than it was in 2022. One reason is the larger share of power generated from renewables, which has softened the effect of higher gas prices on wholesale electricity markets.
ECB economists noted that wholesale gas prices typically have a strong effect on wholesale electricity prices because gas often acts as the marginal price-setter in power markets. This time, however, the shift in the generation mix toward renewables has partly dampened that impact.
The bulletin says natural gas prices have doubled since the start of the conflict in the Middle East, while oil prices have risen more moderately, by about 40%. For Europe, the jump in energy costs has revived inflation concerns, driven mainly by the spike in wholesale gas prices.
The ECB said the Iran war and intensified competition with Asia for spot LNG supply came just as Europe was trying to build natural gas inventories in spring and summer ahead of winter. Against that backdrop, the ECB raised the euro area key interest rate in June for the first time since 2023, and increased it again in September by 0.25 percentage points, with inflation above 3% still well above the bank’s long-term 2% target.
In its monetary policy decision on September 10, the ECB said the outlook remained highly uncertain, with upside risks to inflation and downside risks to economic growth. On that same day, Saudi Arabia’s onshore oil pipeline bypassing the Strait of Hormuz was hit by drones.
In its latest assessment, ECB economists said the pass-through from wholesale to retail prices has sped up overall for gas, although the broader pattern of delayed and uneven transmission remains in both gas and electricity markets.
A survey of central banks across the eurozone found that changes in wholesale gas prices are expected to feed into consumer gas inflation within one to three months in more than half of the currency bloc, within four to six months in around one-tenth of the euro area, and within seven to twelve months in around one-third of the bloc. All of those shares are higher than in 2022.
The ECB also said the share of countries reporting a very slow pass-through of 13 to 24 months has fallen sharply since 2022. That figure has dropped from around 40% to about 5%.
