Officials of the European Union (EU) have warned that prices of oil and gas could remain high through at least the end of 2027 following the Iran war which is likely to keep pressure on inflation and economic growth.
Speaking after a meeting of eurozone finance ministers in Cyprus late last week, EU Economy Commissioner, Valdis Dombrovskis said higher energy costs are now expected to drive inflation to 3.1 percent this year and 2.4 percent in 2027 well above the bloc’s earlier forecast of 1.9 per cent for this year.
The concern is no longer just fuel prices themselves. Once energy inflation gets loose, it tends to wander through the rest of the economy and make itself at home.
“We expect that this energy inflation will gradually also trickle down to different sectors of the economy,” Dombrovskis said. European Central Bank president, Christine Lagarde warned that even if the Middle East conflict ended immediately, the economic aftershocks would continue.
Supply disruptions can end quickly on paper and still leave pricing distortions that linger for years. Europe already learned that lesson after Russia’s invasion of Ukraine. Now it is getting a second reminder.
The region spent the past two years stabilising after one energy crisis, only to run headlong into another.Europe was already grappling with some of the highest electricity prices among major economies.
Before the Iran war, EU power prices were running at more than twice U.S. levels and roughly 50 per cent above China, according to the International Energy Agency, IEA.
That cost problem increasingly reaches far beyond household utility bills. Europe has already been losing ground in the AI and data center race because power is expensive, grid capacity is tight, and connection wait times can stretch for years.
