The European Commission has downgraded its forecast for the EU economy due to the conflict in the Middle East
The European Commission has published its Spring Economic Forecast for 2026, which predicts a significant slowdown in economic activity and a surge in inflation across the European Union.
The main cause of these negative developments is the large-scale conflict in the Middle East, which has triggered yet another major energy shock and shaken financial sentiment across the continent.
The new geopolitical realities have forced analysts to revise their previous estimates downward for key indicators.
“By the end of February 2026, the EU economy was expected to continue growing at a moderate pace alongside a further decline in inflation, but the outlook has changed significantly since the start of the conflict. Inflation began to rise a few weeks after the conflict began, driven by a sharp increase in energy prices, and economic activity is losing momentum,” the official document states.
According to updated data, following a 1.5% increase in the EU’s gross domestic product in 2025, the current growth rate will slow to 1.1% in 2026. This is 0.3 percentage points lower than the optimistic autumn projections.
For eurozone countries, the forecast is even more subdued—growth will be only 0.9% in 2026, though analysts expect an acceleration to 1.2% in 2027.
At the same time, the inflation rate within the European Union will reach 3.1% in 2026, which is a full percentage point higher than experts’ previous estimates.
The energy crisis directly affects citizens’ daily lives and the financial stability of the business environment.
“As a net energy importer, the EU economy is highly vulnerable to an energy shock caused by the conflict in the Middle East—the second such shock in less than five years. The sharp rise in energy prices means higher household bills and rising business costs, which is reducing profits in many industries,” the European Commission explains.
Energy pressures have also negatively impacted the labor market, where a prolonged period of steady decline in unemployment is gradually coming to an end.
While employment grew by 0.5% in 2025, this rate is expected to slow to 0.3% in 2026.
“In 2025, employment grew by 0.5%, adding over 1 million jobs to the EU economy. In 2026, employment growth is projected to slow to 0.3%, and in 2027, there will be a slight acceleration to 0.4%,” the report’s authors note.
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