Inflation hits 3.2% in the euro zone as Iran war pushes energy costs higher

Euro zone inflation rose to an estimated 3.2% in May, driven by double-digit energy price growth, official data showed on Tuesday.

The print, which was in line with forecasts in a Reuters poll of economists, is expected to lock in expectations of an interest rate hike at next week's European Central Bank meeting.

Energy costs represented the highest annual rate of inflation in May, according to the flash data, with prices rising by 10.9% — a slight rise from the euro zone's 10.8% energy price growth recorded the previous month.

Services inflation rose to 3.5% from 3% in April, while food, alcohol and tobacco prices cooled to 2% from 2.4% the previous month.

Inflation rates also varied drastically between individual markets. Germany, Europe's biggest economy, saw annual inflation fall to 2.7% in May from 2.9% in April. But Greece and Lithuania's annual inflation rates rose above 5% last month. In France, annual inflation rose from 2.5% in April to 2.8% in May.

Tuesday's print showed inflation in Europe is continuing to rise above the European Central Bank's 2% target as oil and gas prices remain elevated in the wake of the U.S.-Iran war.

Inflation in the euro zone jumped to 3% in April, up from 2.6% in March. Prior to the outbreak of the conflict in Iran, inflation in the euro area had dipped below the 2% threshold.

Europe is particularly vulnerable to energy shocks as a major net energy importer.