Europe is baking, and it’s not just uncomfortable. It’s expensive. Record-breaking heat waves that began sweeping across the continent in late May 2026 have sent energy demand surging, power prices spiking, and inflation expectations climbing at exactly the wrong time for a central bank that just hiked rates for the first time in years.

Nomura has flagged the environmental crisis as a potential inflation accelerant, warning that higher energy costs tied to extreme weather could keep price pressures elevated well into 2027 and 2028. For crypto markets, which have spent the past year dancing to the tune of central bank policy, this is a development worth watching closely.

The heat is on, literally

The numbers paint a stark picture. Belgian power prices spiked above €1/kWh during the worst of the heat wave. On a single day at the end of May, day-ahead electricity prices in Belgium surged 29%.

Belgium wasn’t alone. Spain, Italy, the UK, Germany, and France all felt the impact as temperatures shattered records across the region.

The ECB had already been dealing with energy-related inflation pressures before the thermometers broke. On June 11, 2026, the bank raised interest rates by 25 basis points, its first hike since 2023. The increase takes effect on June 17.

ECB President Christine Lagarde pointed to war-related energy pressures as a critical driver behind the decision. The bank’s own projections tell the story: headline inflation is expected to hit 3.0% for 2026, then gradually ease to 2.3% in 2027 and 2.0% in 2028.

Why Nomura sees bigger problems ahead

Nomura’s analysis suggests the inflation risks extend beyond the ECB’s current forecasts. The firm has highlighted energy-related factors as potential drivers of higher-than-expected inflation through 2027 and 2028, precisely the years when the ECB expects prices to be cooling back toward its 2.0% target.

What this means for crypto and risk assets

Rising interest rates make yield-bearing assets more attractive compared to speculative ones. When you can earn a decent return parking money in bonds or savings accounts, the opportunity cost of holding volatile assets like Bitcoin or altcoins goes up.

Nomura’s warning adds a layer of uncertainty to that calculus. If heat wave-driven energy costs keep inflation elevated beyond current ECB projections, the timeline for eventual rate cuts could extend further than anyone expected.

There’s also a second-order effect worth considering. Higher energy prices directly impact Bitcoin mining operations in Europe, squeezing margins for miners who already operate on thin profitability. European miners and data center operators face real cost pressures when electricity prices spike 29% in a single day.