Inflation in the eurozone rose this month further above the European Central Bank's target, as energy costs accelerated again and services prices firmed, with the future path of price rises dependent heavily on the development of the conflict in the Middle East.

Annual consumer-price inflation in the 21-nation eurozone was 2.9% in July, up from 2.8% in June, the European Union's statistics agency said Friday. That was a little above expectations of a consensus of economists polled by The Wall Street Journal, that saw the rate holding at 2.8%.

Energy inflation, which had cooled in June after tensions in the Persian Gulf eased, rose to 10% in July from 8.5% last month. The resumption of hostilities between the U.S. and Iran led oil prices higher throughout much of this month, though they have pared back in the last week. The increase in energy inflation was also likely due to the elapsing of a fuel tax-reduction program in Germany at the start of the month.

There were also signs that the dramatic rise in oil-and-gas costs since the outbreak of the Iran war could be driving up prices elsewhere in the economy. Services inflation picked up to 3.3%, from 3.2%, while core inflation edged higher to 2.5% from 2.4%.

"This is likely to mark the beginning of a rise in the core inflation rate...The longer the conflict in the Middle East persists and disrupts the transport of oil and oil products, the more companies will pass on their higher energy costs," said Vincent Stamer, senior economist at Commerzbank, in a note to clients.

All that took the inflation rate further ahead of the ECB's 2% target, above which it has been since March. The ECB left its key interest rate on hold earlier this month, with most investors expecting it to hike again at its next meeting in September.

At the bank's July meeting, its President Christine Lagarde said the outlook for energy prices, while volatile, is in line with the ECB's baseline projections, even if that is well above levels prior to the start of the war.

"Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out," Lagarde said.

Policymakers may be reassured by data showing the eurozone economy expanding by 0.4% in the second quarter of this year, faster than expected and outpacing even U.S. output. That indicates the jump in energy prices hasn't yet prompted a rapid downturn in domestic demand even as business and consumer confidence sank.

Since the increase in July's inflation rate was only marginal, the data adds only modestly to the case for a September rate hike, Oxford Economics economist Iain Simmons said.

"However, inflation remains above target and [the] upside GDP surprise suggests that the eurozone economy may be more able to absorb tighter policy more easily than previously thought," he added.