Eurozone private sector activity recorded its slowest growth since May of last year in March, as conflict involving Iran drives inflation higher and threatens the region's fragile economic recovery.

The Eurozone Composite Purchasing Managers' Index (PMI), compiled by S&P Global, fell from 51.9 in February to 50.5, though it remained above the 50 threshold that separates expansion from contraction. Analysts had expected the index to drop to 51.

In Germany, the Eurozone's largest economy, the composite PMI declined more than anticipated but stayed above 50. France performed more weakly, falling below this level for the third consecutive month. Weakness in both countries was concentrated in the services sector, while manufacturing showed relatively better performance.

"The preliminary Eurozone PMI for March is sounding a stagflation alarm. Conflict in the Middle East is driving prices sharply higher while simultaneously curbing economic growth," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, in a statement on Tuesday. "Due to surging energy prices and supply chain disruptions caused by the conflict, business costs are rising at the fastest pace in over three years."