European Commission cuts 2026 growth forecast amid Middle East energy shock

The European Commission has significantly downgraded its economic growth forecast for the European Union and the eurozone for 2026, citing a renewed energy shock triggered by conflict in the Middle East. The executive body also raised its inflation projections, warning that higher energy prices are eroding household incomes and business confidence.

In its Spring 2026 Economic Forecast, the Commission now expects EU gross domestic product to grow by just 1.1% next year, a reduction from the 1.4% forecast last autumn. Growth in the eurozone is projected to be weaker still, at 0.9%, down from a previous estimate of 1.2%. Officials attributed the downward revision primarily to the war, which has disrupted shipping through the Strait of Hormuz and driven a surge in global oil and gas prices.

The conflict has also pushed inflation forecasts sharply higher. The Commission now expects inflation in the eurozone to average 3.0% in 2026, well above the European Central Bank’s 2% target and a significant increase from the 1.9% projected six months ago. EU-wide inflation is forecast at 3.1%. The report described this as the second major energy shock to hit Europe in less than five years,...