EU Economy Commissioner Valdis Dombrovskis said on Monday that surging energy prices are hitting firms and households across the bloc.
He warned the conflict is driving the EU towards weaker growth and higher inflation, combining the two pressures in a stagflationary shock.
The remarks underscore mounting concern over how the Iran war's energy fallout could weigh on Europe's economy if price pressures persist.
As stagflation grips Europe, will the fight against inflation unavoidably trigger a deep and painful recession?
Beyond bailouts, will this energy crisis force a permanent revolution in Europe's green and security policies?
2026 Eurozone Economic Outlook: Stagflation Triggered by Middle East Energy Disruptions
Overview
In early 2026, the Eurozone faced a severe stagflation crisis triggered by a Middle East conflict that disrupted global energy supplies, especially through attacks on key facilities and a blockade of the Strait of Hormuz. This caused oil and gas prices to surge, sharply increasing Europe's energy import costs and fueling inflation while stalling economic growth. The energy shock weakened consumer purchasing power and business confidence, leading to reduced spending and investment. Policymakers, particularly the ECB, struggled to balance fighting inflation with supporting fragile growth amid currency volatility and limited fiscal tools. Europe's heavy reliance on imported energy exposed systemic risks, prompting urgent shifts toward renewable energy, supply diversification, and infrastructure resilience to secure long-term stability.