The Bank of Spain now projects 2.6% growth in 2026, 0.3 percentage points above its June forecast, alongside average inflation of 3.9%. At Spain's MIBGAS exchange, natural-gas prices climbed from about €30 per MWh at the end of February to more than €50 per MWh in early March, reflecting the energy pressures behind the outlook.
For 2027, the bank projects growth of 2.2%, 0.5 percentage points above its June estimate. Its inflation forecast has risen to 3.7%, up 1.1 percentage points from the previous projection.
The shock is hitting through energy markets. The conflict in the Middle East and the closure of the Strait of Hormuz have pushed up oil and natural-gas costs. Electricity prices are absorbing part of the increase, while service businesses face higher operating bills. The Bank of Spain says the disruption affected roughly one-fifth of global liquefied natural gas trade, including Qatari supplies.
Domestic demand is driving the expansion. Household consumption remains the basic engine: real disposable income is rising, while savings continue to support spending. A dynamic labour market is adding momentum to the recovery.
Population growth driven by migration is adding to that support. The external sector is also performing well, bolstering the Bank of Spain's expectation that activity will hold up even as energy costs worsen the inflation outlook. Its October projections imply that average inflation in 2026 will be about 1.2 percentage points higher than in 2025.
Futures used in the Bank of Spain's calculations pointed to fourth-quarter 2026 prices of about €141.4 per MWh for electricity and €74.2 per MWh for gas. Those market assumptions leave little room for a quick decline, keeping pressure on household bills and business costs.
The price shock is expected to persist. The Bank of Spain links the inflation path to how long the Middle East conflict lasts and to conditions around the Strait of Hormuz. Relief depends on the energy crisis easing and domestic demand slowing. Until then, stronger growth will coexist with elevated prices.
Recent data show the impact. RTÉ, citing Spanish price statistics, reported annual inflation of 4.9% in September, the highest level since February 2023. Since the Middle East crisis began, petrol prices have risen by 23% and diesel prices by 33.5%, lifting costs for transport-intensive businesses and household budgets.
Higher energy costs raise electricity bills and feed into the wider basket of goods and services. Consumption has not collapsed: families are still spending as real disposable income and savings hold up, supporting internal demand even as the Bank of Spain expects inflationary pressure to persist.
Madrid has tried to cushion the increase with fiscal anti-crisis packages. Spain has ranked among the countries spending the most on that support, but the measures are also widening the public deficit. The Bank of Spain estimates the social shield will add three tenths to the deficit of public administrations in 2026 and two tenths in 2027.
The government restored a temporary fuel-tax reduction of 20 euro cents per litre in October. Approved on 29 September in response to the energy shock, it is scheduled to drop to 13 cents in November and six cents in December.
Lombard Odier's analysis finds that a 75% rise in European gas prices in 2026 has had a substantially smaller effect on Spain's electricity sector than during the 2022 crisis. Expanded renewable generation and weaker links between gas and electricity prices help explain the difference, although higher bills remain a risk.
The Bank of Spain's forecast comes with a clear condition: if the conflict and disruption around the Strait of Hormuz persist, growth of 2.6% could coincide with a continued decline in purchasing power.
