Eurozone consumers have sharply increased their expectations for inflation, a European Central Bank (ECB) survey shows, after the Middle East war sent energy costs surging, according to AFP.

Inflation expectations are closely watched by the ECB, which is mulling whether it needs to hike interest rates if consumer prices rise faster due to the US-Israeli war against Iran.

Median expectations for inflation over the next 12 months increased to four per cent in March, from 2.5pc in February, the monthly survey shows.

Expectations for inflation three years ahead meanwhile climbed to 3pc from 2.5pc in February.

The ECB’s inflation target is 2pc.