EU, UK Warn of Inflation Surge from Middle East Tensions

European Union officials and British business leaders have issued stark warnings that escalating tensions in the Middle East could drive inflation above target levels across the region and significantly curb economic growth into 2026.

The alerts come amid rising oil and natural gas prices linked to the ongoing conflict, particularly involving Iran, which has pushed Brent crude toward 100 dollars per barrel. In Brussels, European Commission Executive Vice President Valdis Dombrovskis, the bloc's economy chief, told finance ministers that sustained high energy costs could propel EU inflation beyond 3 percent in 2026. This would reverse recent progress in moderating price pressures from earlier energy shocks. Dombrovskis added that such a scenario might slash economic growth to 1 percent by 2026, a 0.4 percentage point decline from the commission's prior forecast of 1.4 percent. He highlighted vulnerabilities in Europe's reliance on imported fuels, noting that elevated prices would quickly raise costs for transport, manufacturing, and household energy bills, potentially dampening consumption and increasing business expenses.

In London, the British Chambers of Commerce echoed these...