Eurozone inflation risks have increased as wholesale gas prices rose to €85/MWh, prompting an upward revision to the core HICP outlook of around 7bp on average in 2027 and 3bp in 2028. Higher gas and, to a lesser extent, Brent prices are expected to lift near-term inflation, although German and French measures to reduce pump prices should partially offset the direct impact. The forecast remains below market pricing over the next five months before converging towards the end of Q1 2027 and diverging lower again from Q3 2027, reflecting the assumption that energy commodity prices follow strongly backwardated futures curves.Despite higher energy prices, euro inflation forwards have edged lower in recent weeks, reflecting deteriorating market sentiment and pressure on risk assets rather than a straightforward repricing of inflation risks. Similar dynamics occurred in June 2022, when broader market stress weighed on inflation-linked instruments.The strategy team is assessing the potential downside for euro inflation swaps, forwards and breakevens if sovereign spreads widen further. Its analysis examines 14 episodes of significant Eurozone sovereign spread widening between 2010 and 2026 to quantify how renewed fiscal or market stress could offset the inflationary impact of higher energy prices.