Europe’s oil and gas prices will remain above what they were before the Iran war for at least until the end of 2027, EU and eurozone officials said Friday, warning that the energy shock could keep feeding into broader price pressures. The comments were made after a meeting of the Eurogroup, the 21-member eurozone body made up of finance ministers.
EU Economy Commissioner Valdis Dombrovskis said the inflation outlook is being shaped primarily by energy costs. He linked the higher energy-price path to an updated forecast that puts inflation at 3.1% for this year and 2.4% for 2027, a significantly higher view for 2026 than an earlier forecast of 1.9%, he said.
Dombrovskis also described how the energy-driven inflation would spread beyond households and directly affected sectors. “We expect that this energy inflation will gradually also trickle down to different sectors of the economy,” he said after the Eurogroup meeting, framing the outlook as a gradual transmission rather than a one-time move in energy prices.
European Central Bank President Christine Lagarde said the central bank is preparing for a longer period of elevated prices even if the Middle East conflict ended immediately. Lagarde said that even in that scenario, “lagging effects” would keep energy-related price levels elevated, and she added that it is “probably a fact that price levels will be higher at the end of this crisis, when we see the end of the crisis.”
Lagarde said the ECB would respond using measures intended to protect price stability at its 2% medium-term target. She said the ECB would take “all the necessary measures,” adding that it would pay close attention to aftereffects from the initial economic shock caused by the energy-price hike. She also pointed to how much oil the EU holds in reserve to meet possible demand.
Eurogroup President Kyriakos Pierrakakis said that, for the EU, an end to the crisis would mean a return to free navigation. He specifically tied that to the Strait of Hormuz, saying there would be no imposition of tolls through the strait, which he said carries roughly a fifth of the world’s oil and gas.
Pierrakakis said the eurozone’s growth outlook would still be weaker than earlier projections but not recessionary. He affirmed that eurozone economic growth would reach 0.9% this year and 1.2% in 2027, “but clearly far from a recession scenario,” while indicating that officials were working through the implications of energy costs for both inflation and activity.
Although higher inflation projections have prompted speculation that the ECB could raise its benchmark interest-rate settings, Lagarde did not offer a signal about how the bank would act next. Instead, she said the ECB would continue to follow a “data-dependent and meeting-by-meeting approach” to decide the most appropriate monetary-policy stance to deliver on its 2% target.