The European Union is preparing to lower its economic growth outlook and raise inflation forecasts as the Iran war continues to disrupt global energy markets, according to EU Economy Commissioner Valdis Dombrovskis.
Speaking to CNBC during the G7 finance ministers’ meeting in Paris, Dombrovskis described the situation as a “stagflationary shock,” warning that Europe is facing weaker growth alongside rising prices.
The ongoing closure of the Strait of Hormuz has kept oil prices above $100 per barrel, increasing pressure on businesses and consumers across Europe.
The EU will cut growth outlook, raise inflation forecast as Iran war drives 'stagflationary shock' https://t.co/HEnwSLEfI5
— CNBC (@CNBC) May 18, 2026
According to the report, EU policymakers now have limited room for large-scale stimulus measures similar to those used during the Covid pandemic. Dombrovskis said any government support should remain temporary and targeted.
The International Energy Agency also warned that global oil inventories are shrinking rapidly, raising fears of future shortages and additional price spikes. EU officials said strategic oil reserve releases are already underway to ease supply pressures.
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