German, Spanish Inflation Reach Multiyear Highs

German and Spanish inflation climbed to multiyear highs in April, lifting market inflation risks across the euro area. Germany’s harmonized CPI rose to 2.9% year-on-year (from 2.8% in March) and Spain’s CPI to 3.5% (from 3.4%). The rise was driven by soaring energy costs after renewed Middle East tensions raised Brent crude above $110/barrel, pushing German energy prices up 10.1% y/y. The data increases the probability that elevated energy costs will keep inflation sticky, complicating the ECB’s path to a 2% target; the ECB still looks likely to keep rates on hold near-term but says it is ready to act if needed. The ECB projects eurozone headline inflation averaging 2.6% in 2026, and economists warn a prolonged conflict could lift consumer prices toward 4.8% in 2027. Markets will watch eurozone-wide inflation and oil moves for signals on policy and FX (EURUSD) and energy-sensitive assets.