Middle East Energy Shock Could Slow Eurozone Growth

The European Commission expects economic growth in the eurozone to slow in 2026 as a result of the war in the Middle East and rising energy prices. According to Brussels, the conflict has triggered the bloc’s second major energy shock in less than five years.

Oil prices have climbed above $100 a barrel, a development the Commission says will fuel inflation and weaken confidence among households and businesses. The eurozone economy is now expected to grow by 0.9% in 2026, down from 1.3% this year, while inflation is projected to rise to 3%.

The Commission warned that the outlook will largely depend on the duration of the conflict. Although a fragile ceasefire between the US and Iran remains in place, the Strait of Hormuz is still effectively closed.

Economy Commissioner Valdis Dombrovskis said that a prolonged disruption to energy supplies could cut growth forecasts roughly in half. The European Central Bank is therefore expected to raise interest rates at its June meeting.

(reuters, bak)