Geopolitical tension in Middle East once again has direct consequences on the European economy through the energy market. The price of oil, which was around 60 dollars per barrel, has exceeded 110 dollars in just ten days, although it subsequently registered a drop of about 20 dollars to settle around 80 in a matter of hours. Each of these crude oil movements has immediate effects on the European economy: greater pressure on inflation, new doubts about the monetary policy of the European Central Bank (ECB) and a potential impact on the domestic economy, which can have its effect on mortgages.
“Energy is the first link. When that piece moves, everything else starts to wobble,” summarizes Olivia Feldman, economist and co-founder of HelpMyCash. The mechanism, she explains, is direct: if the price of oil rises and remains high, energy becomes more expensive, which in turn increases the cost of transporting goods, of food production, of manufacturing goods or of heating buildings.
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That increase ends up being passed on to the final price that consumers pay. “That is inflation,” Feldman points out. “It is not an abstract concept: it is simply that each time you need more money to buy the same thing.”
Europe had been trying for years to close the inflationary chapter that followed the pandemic and the energy crisis caused by the war in Ukraine. However, the rising price of oil now threatens to reopen that scenario of pressure on prices.
The dilemma of the European Central Bank
In this context, as they explain in HelpMyCash, the markets' attention turns towards Frankfurt, headquarters of the European Central Bank. The ECB has a mandate to maintain price stability in the European Union, which translates into inflation close to 2%, and its main tool to achieve this are the interest rates.
Until a few weeks ago, markets took for granted that rates would remain stable around 2% during 2026. However, volatility in the energy market has changed forecasts. “If the conflict prolongs for months and inflation rises again, the ECB could be forced to raise rates again”, warns Feldman. In fact, some analysts, including Goldman Sachs, are already contemplating two possible hikes in the second half of the year, with a first one between June or July and another in September.
The problem is that none of the options is simple. Raising rates can help contain inflation, but it also slows down economic activity, at a time when major European economies like Germany or France are not going through their period of greatest dynamism.
The Euribor reacts and mortgages notice it
Financial markets usually anticipate central bank decisions. That reaction has already been reflected in the euribor, the index to which most variable mortgages in Spain are linked. In one week it has gone from 2.22% to 2.31%, its highest level since March 2025, and futures markets indicate that it could approach 2.5% by the end of the year.
“We are not at the tension levels of 2023 or 2024, when the Euribor reached 4%,” Feldman clarifies. “But it is a reminder that the cost of money can rise again.” The direct consequence will occur when variable mortgages are reviewed, which could experience increases in the installment. Those who have fixed mortgages, on the other hand, are protected from these movements.
Uncertainty also affects those who are thinking of signing a new mortgage, since if the economic scenario worsens, financing conditions could tighten, both for variable, mixed, or fixed mortgages. “At HelpMyCash we have been warning Spaniards for at least three years to avoid taking out variable mortgages and encouraging those who have one to switch to a fixed one. It is the only way to protect oneself from Euribor increases,” says the economist.
Effects on savings and on markets
The increase in interest rates also has consequences for savings. In theory, when the price of money rises, banks should pay more for deposits, although in Spain this happens to a lesser extent than in other countries. "There are entities, although not many in Spain, that pass on the ECB's interest rate to their clients to attract savings and we have to take advantage of these movements," explains Feldman.
However, it warns that, if inflation strongly rebounds again, that higher interest may not fully compensate the loss of purchasing power. “But worse is nothing. Let's remember that inflation is already eating our savings, we must try to remunerate our money as much as we can.”
Interest rate movements also affect financial markets. In particular, fixed-income funds, where many small savers seek refuge. "When rates rise, old bonds lose value," recalls Feldman, which can lead to losses in these funds even without the investor having sold their shares.
The stock market has also registered drops in recent days, although for now contained. “In episodes of high volatility there are always investors who panic and sell, but calm is usually a better advisor,” explains Feldman. According to him, stock market investment should be analyzed with a long-term perspective, as it goes through cycles of ups and downs, but historically maintains an upward trend.
Ultimately, the economic impact will depend on the evolution of the conflict. “The entire equation depends on a single unknown: time. If the conflict is resolved in a few weeks, the economic impact will be limited,” concludes Feldman. “But if it becomes entrenched, Europe could face a new episode of inflation and higher interest rates for longer”.