Eurozone inflation accelerated to 2.5% in March, exceeding the European Central Bank's 2% target for the first time since late last year. Eurostat's flash estimate attributes the jump from February's 1.9% reading primarily to energy costs, which rose 4.9% after declining 3.1% the prior month. The conflict in Iran, including near-closure of the Strait of Hormuz, has nearly doubled oil prices and strained supplies of refined products like diesel.

Services inflation, a key indicator of domestic price trends, eased slightly to 3.2% from 3.4%. Core inflation excluding food, energy, alcohol and tobacco dipped to 2.3% from 2.4%. As reported earlier, these figures underscore the supply-driven nature of the uptick, reminiscent of 2022's energy crisis but in a tighter policy environment.

The European Commission warned EU states to brace for prolonged energy market disruptions. In a letter seen by Reuters, Energy Commissioner Dan Jørgensen urged avoiding policies that boost fuel consumption or hinder refining operations, amid attacks on Gulf infrastructure.

ECB Governing Council member Boris Vujcic acknowledged the rise was anticipated. "This is what we have expected... inflation is certainly going to rise in connection to events in Iran," he told reporters in Zagreb. Prolonged damage to energy facilities could amplify pressures, though he avoided signaling April rate moves, citing incoming data.

Complementing this, ECB economists detailed new models in a blog post to refine inflation expectation tracking. These interpolate infrequent surveys into monthly curves and strip risk premia from market measures, aligning short- and medium-term views closely during past surges.

ING strategist Simon Wiersma sees growth concerns outweighing inflation risks, forecasting steady 2% rates "for a long time." Markets price three hikes this year, possibly starting April or June. Policymakers like Bundesbank's Joachim Nagel deem April possible, while Isabel Schnabel cautions haste. The ECB reconvenes April 30.

Dutch markets showed resilience, with the AEX turning positive amid data processing. Invesco's Benjamin Jones notes no panic selling yet, as investors trim prior winners rather than fleeing to cash.