ECB forecasts: Middle East oil shock to cut eurozone GDP by 0.4% in first year
Every 10% rise in oil prices reduces GDP by 0.2–0.3% over three years. Investment will suffer more than consumption. Price increases exceed 2022 levels but are lower than the 1990s shock. The ECB warns: prolonged high prices and supply chain disruptions could intensify the pressure.
As reported by CCTV+, according to a study published on Wednesday by the European Central Bank (ECB), the oil shock caused by the war in the Middle East could reduce eurozone GDP growth by approximately 0.4 percentage points in the first year after the shock. Since the war began in late February, disruptions to oil supplies through the Strait of Hormuz and reduced supply from the Middle East have caused a sharp rise in oil prices.
The price increase triggered by the current shock has so far exceeded that observed after the Russia Ukraine conflict in 2022, though it remains lower than the rise seen during the Gulf War in the early 1990s.
The ECB said higher oil prices are likely to put pressure on the eurozone economy through higher production costs, reduced household purchasing power, weaker global demand and increased uncertainty. Based on historical data, the ECB estimated that a geopolitical oil supply shock that raises real oil prices by 10 per cent could reduce eurozone GDP growth by around 0.2–0.3 percentage points in each of the three years following the shock.
The study found that the impact on investment is likely to be more pronounced than on private consumption. Greater geopolitical uncertainty could prompt companies to postpone expansion plans, equipment purchases and hiring decisions, reducing investment activity and amplifying the impact on economic growth.
The ECB noted that the eurozone's dependence on oil has declined over time, but the response of investment to geopolitical oil supply shocks appears to have remained broadly stable. The study warns that the overall impact of the current shock remains highly uncertain and will depend on the scale and duration of oil price increases. A prolonged period of high oil prices, more widespread supply chain disruptions, or spill over effects on gas markets could further amplify the downward pressure on eurozone growth.
The European Central Bank is the main regulator of the eurozone, responsible for monetary policy in 20 EU countries. The Strait of Hormuz is a strategic maritime corridor through which about 20% of global oil passes. The war in the Middle East, which began in late February 2026, led to a de facto blockade of the strait and a sharp price spike. The ECB study is based on historical data and models the likely consequences. The eurozone's dependence on imported oil remains high, though it has declined over recent decades thanks to energy diversification.
When the price of oil soars, every barrel hits pockets, plants and hiring decisions. The ECB crunches the numbers — 0.4% of GDP in the first year, 0.2–0.3% in each of the following three. But behind these percentages lie real factories that will not get new machinery, families that will postpone purchases, companies that will freeze hiring. The war in the Middle East has already shown that this shock is greater than in 2022, but smaller than in the 1990s.
Yet the numbers offer no comfort: investment suffers more than consumption, and uncertainty paralyses decisions. The ECB's main concern is not the current shock itself but its duration. If high prices persist and supply chains continue to break, the eurozone risks not just a slowdown but prolonged stagnation. The world has seen such scenarios before. And they have never ended well.
