The European Commission lowered its 2026 growth forecast for the European economy on Thursday as ongoing conflict in the Middle East ’ sharply raised energy prices.
Commission in the EU economy 2026’'s autumn forecast %1,4Under ’ only %It is expected to grow by 1.1 percent. The Eurozone outlook was revised to 0.9%.
In its report, the Commission warned that the disruption in global energy markets caused by rising tensions around the Strait of Hormuz, one of the world's most important oil and gas transport routes, has significantly worsened the economic outlook of the European Union.
The report, “February 2026Before the end of ’, the EU economy was expected to continue to grow at a moderate pace, with further declines in inflation, ” said. “However, the outlook has changed significantly since the outbreak of the conflict.”
Due to the turmoil around Hormuz, inflation is also expected to rise sharply.
EU inflation this year %It is projected to reach 3.1’e (a full point higher than previously expected).
According to EU officials, this shock is reminiscent of 2022, when Russia’'s invasion of Ukraine’ triggered Europe’'s worst energy crisis in decades.
Describing the recent turmoil as “'s second shock in less than five years, the Commission warned that Europe's dependence on imported fossil fuels leaves ” extremely vulnerable in any situation where geopolitical tensions threaten the global energy supply.
According to estimates, as households prepare for higher heating and fuel bills, businesses face rising operating costs and weak demand, while consumer confidence has already fallen to a 40-month low.
Investments are also expected to slow as companies face tighter financing conditions and increased uncertainty. As global demand softens, export growth weakens.
Despite the deteriorating outlook, Brussels said the bloc was better prepared for the Ukraine-related energy crisis thanks to years of investments in renewable energy, low gas consumption and efforts to diversify supplies from Russia ’.
The Commission, “Arz diversification, decarbonisation and pressure on lower energy consumption have put the EU economy in a position to better absorb today's shock, ” said.
But EU officials have acknowledged that the risks remain predominantly downside.
The report warned that a prolonged disruption in the Strait of Hormuz ’nda or wider Middle East supply chains could further raise energy prices, derail the expected easing in inflation in 2027’, and potentially halt the European’ recovery altogether.
The Commission also warned that shortages in refined petroleum products, fertilizers and other industrial inputs could spread to global supply chains and increase food and production costs across Europe.
Meanwhile, European governments are preparing for increased financial pressure. Public deficits are expected to increase across the EU as governments increase spending to protect households from rising energy bills and increase defense spending amid increasing geopolitical instability.
Italian Prime Minister Giorgia Meloni recently urged the European Commission to loosen financial rules for households and industries struggling with rising energy costs, arguing that energy security should be addressed with the same urgency as defense spending.
At the heart of Roma’'s demand is the national escape clause adopted by AB’ on July 8, which gives member states temporary financial flexibility to increase defense spending under extraordinary conditions.
Meloni, Brussels’in Russia’'s UkraineIn response to growing concerns about ’'s war on ’ and its military readiness, Europe has already shown its willingness to loosen budgetary rules, he said. Italy is now looking for similar flexibility for emergency energy measures.
