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The European Commission has projected weaker economic growth across the European Union in its Spring 2026 Economic Forecast, citing renewed energy market disruption linked to geopolitical tensions in the Middle East.

The report shows that higher energy prices are driving inflation, slowing economic activity, and reducing household and business confidence across member states.

Energy Shock Reshapes Growth Outlook Across EU

According to the forecast, EU gross domestic product growth is expected to slow to 1.1% in 2026, down from 1.5% in 2025. Growth is projected to recover slightly to 1.4% in 2027 if energy markets stabilize.

The euro area is also expected to experience weaker expansion, with growth revised down to 0.9% in 2026 and 1.2% in 2027. The report attributes the slowdown to higher energy costs, tighter financial conditions, and reduced external demand.

Officials said the EU’s status as a net energy importer has made it more exposed to global energy price fluctuations, particularly during periods of geopolitical instability.

Inflation Pressures Return As Energy Costs Rise

The forecast indicates inflation in the EU is expected to rise to 3.1% in 2026 before easing in 2027. In the euro area, inflation is also projected to remain above previous estimates, driven primarily by higher energy commodity prices.

The report noted that household purchasing power is being affected by rising utility costs, while businesses face higher production expenses and reduced profit margins.

Consumer confidence has fallen to a multi-year low, reflecting concerns about inflation, employment stability, and economic uncertainty.