War in Iran threatens European economy with inflation rising above 3%
Kyiv • UNN
The European Commission warns of rising oil and gas prices due to the conflict. This will lead to a fall in GDP and a tough ECB policy on interest rates.
The European Union has warned of the risk of a sharp acceleration in inflation, which, if high energy prices persist, could exceed 3% this year. This is reported by Bloomberg, writes UNN.
Details
European Commission Executive Vice-President Valdis Dombrovskis noted during a meeting with the bloc's finance ministers that the prolonged stay of Brent oil prices at around $100 per barrel would negatively affect economic growth. In the worst-case scenario, GDP in 2026 will be 0.4 percentage points lower than previous forecasts due to the destabilization of the energy market.
Impact of gas prices and risks to financial stability
The EU's economic forecast predicts that the cost of natural gas in Europe could rise to 75 euros per megawatt-hour by the end of the year, adding about one percentage point to core inflation.
Such dynamics force investors to expect a tougher policy from the European Central Bank, which may raise interest rates to curb prices. Despite the fact that no changes in rates are expected at the next meeting on March 19, new forecasts already partially reflect the negative impact of hostilities on supply chains and financial markets.
Constant targeting of shipping and energy infrastructure risks exposing the global economy to a stagflationary shock in the long run. The impact on the European economy will depend on the duration, scale and intensity of the conflict.
Traders predict euro to fall to parity with dollar09.03.26, 17:43 • 3793 views