FRANKFURT, Germany (AP) — Europe's inflation rate rose to 2.5% in March as the Iran war sent fuel prices sharply higher, official figures showed Tuesday. And that is leading analysts to pencil in interest rate increases by the European Central Bank later this year.
The annual rate for the 21 European Union member countries using the euro currency compared to 1.9% for February before the war started and blocked supplies of oil and gas from the Persian Gulf.
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Glenn Torshizi, whose brothers were executed by the Iranian government, joins others in a picket line at the U.S. State Department, to highlight the executions in Karaj, Iran, of People's Mojahedin Organization of Iran members, Monday, March 30, 2026, in Washington. (AP Photo/Rod Lamkey, Jr.)
A wrecked gar stands at a gas station in Brombach near Frankfurt, Germany, Tuesday, March 31, 2026. (AP Photo/Michael Probst)
Vegetables in a super market are pictured in Wehrheim near Frankfurt, Germany, Tuesday, March 31, 2026. (AP Photo/Michael Probst)
A woman works at the meat counter of a super market in Wehrheim near Frankfurt, Germany, Tuesday, March 31, 2026. (AP Photo/Michael Probst)
Fuel prices are listed at a gas station in Frankfurt, Germany, Monday, March 30, 2026. (AP Photo/Michael Probst)
Glenn Torshizi, whose brothers were executed by the Iranian government, joins others in a picket line at the U.S. State Department, to highlight the executions in Karaj, Iran, of People's Mojahedin Organization of Iran members, Monday, March 30, 2026, in Washington. (AP Photo/Rod Lamkey, Jr.)
The European Central Bank is seen in Frankfurt, Germany, Tuesday, March 17, 2026. (AP Photo/Michael Probst)
Energy prices increased 4.9% percent in March compared to a 3.1% decline in February, Eurostat figures showed.
The war's impact on prices has already hit home at the vast Trionfale indoor market in Rome just north of the Vatican, where vegetable stand owner Anna Caruso said the higher cost of fuel was being reflected in prices for zucchini, eggplant and fruit.
“If the price of fuel increases, those who transport will increase the general price,” she said. “With many items, they say, I can't afford this ... and shift toward the cheaper items.”
Some prices were higher due to some produce not being in season, said stand owner Paola Ianzi, “but the increase is also partially due to the war because diesel and fuel increased and those who transport fruit and vegetables need to compensate that."
Food price inflation came in at a relatively moderate 2.4% while services, a broad category ranging from medical care to haircuts, rose 3.2%.
European Central Bank head Christine Lagarde has said that businesses may be quicker to raise prices during this outbreak of inflation due to bitter memories of the last episode of higher prices in 2022, when inflation rose to double digits. Russia cut off most supplies of natural gas to Europe and oil prices rose, sending energy costs through the roof.
Iran has blocked most of the tanker traffic through the Strait of Hormuz, the waterway through which some 20% of the world's oil and gas typically passes. That is raising the prospect of sharply tighter markets for fuel in the coming weeks and months.
The expected further rise in inflation beyond the ECB's 2% target is leading analysts to predict the ECB will raise interest rates in the coming months to keep inflation from becoming ingrained in the economy through expectations of higher wages and prices for other goods. “We expect the ECB to raise rates already at the April and June governing council meetings... in order to pre-empt any de-anchoring of inflation expectations,” said Bill Diviney, head of macro research at ABM AMRO bank. Analysts at Oxford Economics also expect two interest rate hikes this year.
The ECB left its key rate unchanged at 2% at its last meeting on March 19. Higher interest rates are the chief central bank tool against inflation.
Associated Press journalist Trisha Thomas contributed from Rome.
A wrecked gar stands at a gas station in Brombach near Frankfurt, Germany, Tuesday, March 31, 2026. (AP Photo/Michael Probst)
Vegetables in a super market are pictured in Wehrheim near Frankfurt, Germany, Tuesday, March 31, 2026. (AP Photo/Michael Probst)
A woman works at the meat counter of a super market in Wehrheim near Frankfurt, Germany, Tuesday, March 31, 2026. (AP Photo/Michael Probst)
Fuel prices are listed at a gas station in Frankfurt, Germany, Monday, March 30, 2026. (AP Photo/Michael Probst)
Glenn Torshizi, whose brothers were executed by the Iranian government, joins others in a picket line at the U.S. State Department, to highlight the executions in Karaj, Iran, of People's Mojahedin Organization of Iran members, Monday, March 30, 2026, in Washington. (AP Photo/Rod Lamkey, Jr.)
The European Central Bank is seen in Frankfurt, Germany, Tuesday, March 17, 2026. (AP Photo/Michael Probst)
NEW YORK (AP) — Walmart delivered another quarter of impressive sales with speedy deliveries and low prices becoming a strong magnet for people across the income spectrum that are spending more on almost everything, particularly gasoline.
Yet like other major retailers posting financial results this week, Walmart was cautious about the rest of the year given the current economic uncertainty. On Thursday, it issued a forecast for the current quarter that was weaker than what Wall Street had been expecting.
Shares slipped about 7% Thursday.
Walmart has resonated with many Americans who are increasingly careful about where they spend their money as inflation takes a bigger bite out of paychecks, notably gasoline which has soared since the start of the Iran war in late February. Walmart can serve as a barometer of consumer spending given its vast customer base. More than 150 million customers are on its website or in its stores every week, according to Walmart.
One telling shift during the quarter that captures the stress many Americans are feeling: The number of gallons that customers put in their cars during visits to U.S. Walmart and Sam’s Club gas stations fell below 10 for the first time since 2022, which was the midst of the COVID-19 pandemic.
“That’s an indication of stress,” said Chief Financial Officer John David Rainey.
Walmart touted strong sales that were fueled by online shopping on Thursday.
Comparable sales at U.S. Walmart stores rose 4.1% during the three-month period ended April 30. Walmart’s U.S online sales rose 26%, the company said.
Walmart’s promise of lower prices, faster delivery and a refresh of its merchandise has attracted wealthier shoppers. The biggest gains in market share for Walmart are coming from households with annual income over $100,000. That shift is taking place as lower-income shoppers become more entrenched in what economists collectively call a K-shaped economy.
“We see with our customers that the high-income customer is spending with confidence into many categories, while the lower income consumer is more budget conscious and perhaps navigating financial distress,” Rainey told analysts on Thursday.
Rainey told analysts that higher fuel prices took a bite out of profits as it was forced to absorb higher transportation costs. And while the company is focused on offering low prices, Walmart may raise prices later if fuel costs remain high, he said.
U.S. retailers have spent months navigating an uncertain economic environment, from President Donald Trump’s tariffs to the impact of soaring gasoline prices due to the war. The average price for a gallon of regular gasoline raced higher this week and did so again overnight. Gasoline prices are about 45% above where they were at this time last year.
Based on quarterly financial reports from Walmart, Target, Home Depot, Lowe's and TJX, shoppers are cautious but still spending, helped by more generous tax refunds. Yet there is a widespread belief among economists that once those refunds dry up, shoppers will pull back on spending. Consumer spending is the dominant economic engine for the U.S., and retreat would have broad implications for the U.S.
Target reported the largest jump in comparable sales in four years Wednesday, but a cautious outlook overshadowed rather convincing evidence that changes under the company’s new CEO are landing solidly with customers. Target raised its annual revenue outlook Wednesday, but it was still below the pace of its first quarter this year.
The nation’s two largest home improvement retailers Home Depot and Lowe’s reported strong sales, but both companies said that customers are putting off larger home projects.
“I think, overall, this has been the most difficult housing market that I’ve faced in this business since the financial crisis,” Lowe’s CEO Marvin Ellison said this week.
Walmart, based in Bentonville, Arkansas reported first-quarter earnings of $5.33 billion, or 67 cents, for the quarter ended April 30. Adjusted per-share results were 66 cents, matching the 66 cents that analysts expected, according to FactSet.
For the year-ago quarter, the company reported net income of $4.48 billion, or 56 cents per share.
Sales rose 7.3% to $177.75 billion in the fiscal first quarter, above the $174.84 billion that analysts predicted.
Walmart said higher fuel prices took a bite out of profits as it was forced to absorb higher transportation costs.
The company highlighted its speedier deliveries, which is driving more shoppers to buy more often. Rainey said that roughly 60% of U.S. online deliveries arrive at customers' homes in 30 minutes or less.
For the second quarter, Walmart expects sales to be 4% to 5% higher than the same period a year ago. It also expects per-share profit to be between 72 cents and 74 cents. Analysts had been projecting per-share earns of 75 cents on sales of $186.2 billion, according to FactSet.
Walmart stuck to the annual guidance that it issued in February.
Drones operated by Zipline leave base to make deliveries from a Walmart store in Pea Ridge, Ark., Friday, Sept. 26, 2025. (AP Photo/Charlie Riedel)
