EU economy commissioner Valdis Dombrovskis warned that the bloc still faces a “stagflationary shock” of weak growth and higher inflation despite the US–Iran two-week ceasefire easing energy tensions, and said the European Commission is preparing to cut its 2025 growth forecast. Before the conflict, the Commission projected EU growth of 1.4% this year and 1.5% in 2027, with inflation just above 2%. Internal scenarios now show growth could slow by up to 0.4 percentage points if energy prices norma

EU economy commissioner Valdis Dombrovskis warned that the bloc still faces a “stagflationary shock” of weak growth and higher inflation despite the US–Iran two-week ceasefire easing energy tensions, and said the European Commission is preparing to cut its 2025 growth forecast. Before the conflict, the Commission projected EU growth of 1.4% this year and 1.5% in 2027, with inflation just above 2%. Internal scenarios now show growth could slow by up to 0.4 percentage points if energy prices normalize by end-2026, or by 0.6 points this year and next if normalization is delayed, while inflation could rise by up to 1.5 percentage points in the more severe case. Dombrovskis said uncertainty remains high regarding the Iran conflict’s economic impact and warned fiscal responses must remain temporary and targeted.