Europe Flirts With Stagflation as War-Driven Energy Shock Hits Growth

Before the war began in late February, Europe’s economy appeared poised for a modest pickup. Inflation had fallen back toward the ECB’s 2% target, consumer spending was holding up, and Germany’s defense and infrastructure spending was expected to provide a boost.Instead, the conflict — particularly the blockade of the Strait of Hormuz — has sent oil and natural gas prices higher. Europe, which relies heavily on imported energy, has been hit especially hard. Energy inflation in the eurozone jumped around 11% in April.