Spain’s business costs are rising due to the Iran war.

The headline figure is not a sign of recession. Spain’s Services PMI rose to 53.3 in March The index is up from 51.9 points in February and remains above the 50-point threshold that separates expansion from contraction. Underneath that, however, the picture looks less rosy. New business rose in February at the slowest rate in nine months. Export orders dropped for the third month running. And firms reported the first quarter of the year 2026 as being weaker than its final stretch.

Spain’s composite PMI grew to 52.4 in part due to the services sector, which helped offset a further decline in manufacturing output. The survey’s cost component is the most notable. The input cost inflation rate has accelerated at its fastest pace in April 2023. This is due to energy, fuel and salary costs, while the firms have raised their prices at the highest rate since August 2025.

Spain’s inflation figures already show the pressure.

The squeeze on inflation is not a theoretical issue. Spain’s March 2026 flash CPI was 3.3% on a year-on-year basis, up from 2.3% last month, and prices were 1.0% higher month-on month. The INE The change in prices was primarily due to higher fuel and lubricant costs for private vehicles. Electricity also played a part, as it dropped less than a year ago.

This is important because it relates the business survey with what households are beginning to feel. Part of the increase in costs is already affecting official inflation. Not only are margins at risk, but consumer demand may also be affected if these higher costs persist. The last sentence is a conclusion based on PMI’s concerns about consumer spending and INE’s inflation data.

Prices in Spain have not all risen yet

This is a very important nuance. RTVE’s breakdown of the March CPI data The price of energy products has risen 7.5% year-on-year and 6.8% monthly, but the increase is not yet widespread across the economy. Industrial goods cost slightly more, but fresh food prices dropped 0.4% on a monthly basis.

This makes it a more compelling business story than the simple story of “supermarkets are increasing their prices everywhere”. Although the pressure is real, it still moves through the system in an uneven manner. First, energy, transportation and operating costs take the brunt of it, with the wider consumer impact still being limited.

Madrid has already tried to cushion the blow

The Spanish government hasn’t waited until the full effects of Hurricane Sandy have hit. A Real Decreto-ley On 20 March, a Plan Integral de Respuesta a la Crisis en Oriente Medio was approved. It included temporary flexibility of certain electricity and natural gas supply contracts up to 31 December 2026 as well as a 80% cut in the cost of accessing electricity networks for industries that are electro-intensive.

Spain has joined Germany, Italy Portugal and Austria at the European level in calling for a EU-wide windfall on energy company profits. The argument is that any extraordinary gains related to the crisis could help fund temporary relief, as well as curb inflationary pressures.

Why this is important beyond the boardroom

The main message for readers in Spain is simple. It is clear that this is no longer a geopolitical issue. While businesses are expanding, they do so despite rising bills, weaker demand and lower confidence. Official inflation has also begun to rise.

Spain’s economy continues to grow, but costs have risen dramatically. The question is not whether the businesses will feel the impact, but rather how much they can continue to pass on until the households begin to pull back. The last sentence is an inference made based on PMI survey pricing and demand signals.