The Strait of Hormuz is closed. Your grocery bill in Munich is the proof.

German inflation hit 2.9% in April, the highest reading since January 2024, according to preliminary data from the Federal Statistical Office. Energy prices drove the surge — up 10.1% year on year, the sharpest jump since February 2023. Spain clocked in even higher at 3.5%, its worst since June 2024, per the National Statistics Institute.

The supply chain is brutally direct. US-Israeli strikes effectively shut the Strait of Hormuz, choking off a critical energy shipping route. QatarEnergy’s production facilities remain damaged, squeezing global LNG supply. Europe imports roughly 10% of its LNG from the Gulf, according to Chatham House, but it competes with Asian buyers for everything else — and the bidding war has already cost the EU an additional €24 billion in fossil fuel imports since the conflict began.

Food prices are following. German food inflation edged up to 1.2% in April from 0.9% in March, per Destatis. Fertiliser and fuel costs are climbing for farmers across the continent.

Brussels scrambled to respond on Wednesday. The European Commission loosened state aid rules, letting governments subsidise up to 70% of extra fuel and fertiliser costs for farmers, hauliers, and fishermen through December. Small operators can access fixed payments of up to €50,000 with minimal paperwork.

The catch: Germany has claimed roughly half of all approved EU state aid since 2022, according to Commission data. Critics warn the framework risks a subsidy race favouring the bloc’s biggest economies.

The ECB meets Thursday in Frankfurt. With eurozone inflation expected at 3% — a full point above target — rate cuts are off the table. The question now is whether rates go up. The Strait shows no sign of reopening, and the IMF has flagged eurozone countries as among the hardest hit by the energy shock, thanks to their lack of domestic supply.

Core inflation in Germany tells a different story: 2.3%, the lowest since June 2021, suggesting the underlying price pressure is manageable. The problem is entirely at the pump and the port — which means it’s entirely geopolitical.

Sources