Europe notes the Iran war’s economic effects persist

(SeaPRwire) –   European Union officials stated on Friday that oil and gas prices in Europe are expected to stay above pre-Iran war levels at least through the end of 2027, with other goods also experiencing sustained upward price pressure.

EU Economy Commissioner Valdis Dombrovskis attributed the rise in inflation—now forecast at 3.1% for this year and 2.4% for 2027—primarily to higher energy costs. This marks a notable increase from the earlier projection of 1.9% for this year.

“We anticipate that this energy-driven inflation will gradually spread across various sectors of the economy,” Dombrovskis said following a meeting of the Eurogroup, composed of finance ministers from the 21-member eurozone.

European Central Bank President Christine Lagarde noted that even if the Middle East conflict were to end immediately, lingering effects would continue to keep prices elevated.

“It is likely that price levels will remain higher once the crisis concludes,” Lagarde added.

She emphasized that the ECB would take “all necessary measures” to maintain price stability at its 2% target by closely monitoring the aftershocks of the initial energy price surge. She also highlighted the EU’s strategic oil reserves as a buffer against potential supply disruptions.

Eurogroup President Kyriakos Pierrakakis stated that, for the EU, resolving the crisis would mean restoring unrestricted navigation through the Strait of Hormuz—a critical route through which about one-fifth of the world’s oil and gas transits.

Pierrakakis confirmed that eurozone economic growth is projected to reach 0.9% this year and 1.2% in 2027, below prior estimates but still well above recessionary levels.

Despite higher inflation forecasts prompting speculation that the ECB might raise interest rates to curb inflation, Lagarde provided no clear signal on the bank’s next move.

“We will continue to adopt a data-driven, meeting-by-meeting approach to determine the most suitable monetary policy stance to achieve our medium-term 2% inflation target,” Lagarde said.