By David Barwick – FRANKFURT (Econostream) – The jump in oil prices caused by the Middle East war is rapidly feeding into prices in the most oil-dependent sectors of the Eurozone economy, though broader pass-through could be more gradual than in the past, according to the European Central Bank’s latest corporate telephone survey, released on Monday.

The ECB said that contacts in air travel, logistics, chemicals, plastics and packaging had reported selling-price increases, often in double digits, already implemented in March or announced for 2Q.

The findings were based on contacts between ECB staff and representatives of 67 leading non-financial companies operating in the Eurozone, with exchanges mainly taking place between March 23 and April 1.

Automatic contract clauses linked to energy prices had facilitated some price increases and were now more common than when Russia invaded Ukraine, as firms had learned from that earlier shock, the ECB said.

At the same time, large firms tended to be better hedged against energy-price fluctuations than in 2022, which should limit the short-term impact somewhat, it said.

For these firms, pass-through from higher energy prices was less direct and came mainly or only through smaller, unhedged suppliers seeking higher input prices, according to the ECB.

Prior to the outbreak of the Middle East war, growth in selling prices had remained moderate, especially in manufacturing and non-food retail, where weak demand and intense competition, particularly from Chinese imports, held prices down, the ECB said.

Relatively few sectors had been seeing significant price increases before the shock, including tourism, AI-related services, semiconductors, aerospace and defense, as well as steel, it said.

If the war were not concluded soon, however, it would likely induce supply-chain disruption, put significant further upward pressure on prices and curtail demand, the ECB said.

A conflict lasting months rather than weeks, with the Strait of Hormuz still blocked or further attacks on oil and gas infrastructure, would result in global shortages not only of fuel but also of many products requiring oil derivatives for their production, according to the ECB.

Contacts were particularly concerned about possible shortages of hydrogen, used in fertilizer production, and helium, used for wafer cooling in semiconductor production and for welding copper and nickel in high-tech industries, the ECB said.

Such supply disruption could generate inflationary pressure more similar to that seen during the Covid-19 pandemic, it said.

However, several factors would mitigate the impact, including weak global demand, no abrupt shift between goods and services consumption, more limited likely fiscal support and more resilient supply chains after recent shocks, according to the ECB.

Contacts continued to expect wage growth to moderate, with quantitative indications implying a slowdown from 3.5% in 2025 to 2.9% in 2026 and 2.8% in 2027, the ECB said.

Still, around 10% of contacts had made small upward revisions to their 2027 wage expectations because of the Middle East war, while around 30% saw the conflict as an upside risk to wages, it said.

On activity, contacts reported good business momentum in 1Q and few signs yet of demand reacting to the war, beyond disruptions directly linked to sales in or travel to and from the Middle East, the ECB said.

Consumer spending growth had maintained a steady pace but was expected to soften in coming months, it said.

Air travel and hotel occupancy had grown at a good pace early in the year, but March brought reports of a downturn in bookings and concerns about lost inbound tourism from Asia and the Middle East, especially over the summer, the ECB said.

For most contacts, the main concern was the war’s impact on consumer confidence and final consumer demand, according to the ECB.