Commissioner Valdis Dombrovskis told MEPs that Europe faces a renewed economic test as conflict in the Middle East drives up energy costs, clouds the inflation outlook and puts fresh pressure on public finances.
BRUSSELS — The European Commission has warned that the latest energy shock linked to the conflict in the Middle East could slow growth across the EU, push inflation higher and complicate the bloc’s fiscal choices just as the reformed EU budget rules are entering a more demanding phase. Speaking at the European Parliament’s Economic and Monetary Affairs Committee on 9 April 2026, Commissioner Valdis Dombrovskis said the European economy is once again being tested by events beyond its borders.
In his remarks to MEPs, Dombrovskis said attacks on the Strait of Hormuz and on energy infrastructure had triggered one of the largest supply-chain disruptions in the history of the global energy market. He noted that a recently announced two-week ceasefire had brought some short-term relief, with Brent crude trading below 100 dollars per barrel, but stressed that the outlook remains uncertain and that Europe is exposed to a possible stagflationary shock — weaker growth combined with higher inflation.
The figures presented by the Commissioner were not a formal forecast, but a scenario analysis. Under a short-lived disruption, the Commission estimates EU growth in 2026 could come in around 0.2 to 0.4 percentage points below the level projected in its Autumn Economic Forecast, while inflation could be up to 1 percentage point higher. If supply disruptions last longer and deepen, growth could be 0.4 to 0.6 points lower and inflation 1.1 to 1.5 points higher in both 2026 and 2027.
The political response is already taking shape. In its 19 March 2026 conclusions, the European Council called on the Commission to present a toolbox of targeted temporary measures to deal with recent spikes in imported fossil-fuel prices, alongside concrete steps to lower electricity prices and curb excessive volatility. Dombrovskis told Parliament that the Commission is preparing proposals that would lower electricity taxation relative to fossil fuels, improve grid efficiency and revisit parts of the Emissions Trading System, including the Market Stability Reserve, in an effort to reduce price swings.
At the same time, Dombrovskis argued that the answer cannot be limited to emergency relief. He said the strategic priority remains the transition to a more electrified European economy, with stronger grids and lower dependence on volatile fossil-fuel markets. That line closely matches the broader debate already taking shape in Europe over energy resilience, including The European Times’ recent look at how the current price shock is reopening the nuclear question.
The Commissioner also used the hearing to defend the EU’s revised fiscal framework. The new economic governance rules entered into force on 30 April 2024 and are meant to combine debt sustainability with room for reforms and investment. Dombrovskis said the framework contains built-in cushioning mechanisms, since revenue shortfalls caused by slower growth do not automatically require offsetting cuts, interest spending is excluded from the net expenditure benchmark, and the cyclical part of unemployment benefits is also excluded. Even so, he warned that any fresh national support measures should be temporary, targeted and designed not to increase demand for oil and gas.
The exchange with MEPs underlined a deeper issue now confronting Brussels: Europe’s economic governance can no longer be discussed in isolation from geopolitics. What began as a fiscal dialogue quickly became a discussion about strategic vulnerability, energy dependence and the limits of economic resilience in an era of repeated external shocks. The Commission’s message was clear: the EU may have better tools than it did in previous crises, but those tools will now be tested under far harsher conditions.
