Energy prices surged after Iran retaliated to US-Israeli strikes with attacks on neighbouring countries and effectively closed the Strait of Hormuz. (Photo: AFP)
BRUSSELS - The euro zone economy will expand less than expected this year, the European Commission said on Thursday, as the Middle East war and subsequent energy shock take their toll.The European Commission said the single currency area’s economy is expected to grow 0.9% in 2026, down from a previous prediction of 1.2%.
The EU also sharply raised its prediction for inflation in the 21-nation eurozone this year to 3.0%, up from 1.9% in the last forecast and well above the European Central Bank’s target of two percent.
EU economy chief Valdis Dombrovskis pointed to the conflict in the Middle East, which “triggered a major energy shock, further testing Europe as it navigates an already volatile geopolitical and trade environment”.
Households and businesses will have to pay more for energy because of the spike in fuel prices, the EU said, pushing the bloc’s economic output down.
