The consequences of the war in Iran from an economic and energy point of view were the main topic of today’s meeting of European economic ministers. A topic that has already been addressed by the G7 Finance Ministers and which will also concern the EU Ecofin Council tomorrow. Before the Eurogroup, the EU Commissioner for Economy, Valdis Dombrovskis, highlighted the risk “of a substantial stagflationary shock” to the global and European economy if the conflict in the Middle East were to continue or expand. Much will depend “on the duration and regional extent of the conflict”, Dombrovskis highlighted. If it lasts beyond two weeks and leads to shipping disruptions on Hormuz or attacks on infrastructure in the Gulf, it could result in “higher energy prices feeding through to inflation, negative effects on confidence, disruptions to supply chains” and a funding crunch (IRAN WAR, SKY TG24 NEWS LIVE). The Italian Minister of Economy Giancarlo Giorgetti during the Eurogroup discussion on the impact of the crisis in the Middle East on energy prices said: “For Europe there are no emergency conditions and instead for us it should evaluate the adoption of extraordinary measures, in the wake of those adopted in 2022 in the aftermath of the Russian attack against Ukraine. Act immediately by stopping energy prices before they spread to all consumer goods as in the ’22”.
Dombroviskis: “Working to de-escalate the conflict”
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As the European Commissioner for Economy explained, the main transmission channel of the crisis is the energy one, through possible interruptions in supplies and increases in prices. “In a more favorable scenario, if the conflict remains contained within a couple of weeks, it can be expected to have no major effects on the global and European economy,” he noted. Conversely, if the war becomes more protracted and affects the region’s trade and energy routes, for example with shipping disruptions in the Strait of Hormuz or attacks on energy infrastructure in Gulf countries, it could lead to higher energy prices with knock-on effects on inflation, confidence and supply chains, as well as tighter financing conditions. For this reason, the commissioner underlined, “it is important to work to de-escalate the conflict as soon as possible: the sooner it happens, the smaller the impact on the global economy will be”. Eurogroup ministers will also have a discussion today dedicated to the impact of the crisis on energy markets and possible policy responses. The European Commission, Dombrovskis added, is evaluating various options. “On the Commission side we have some reflections on possible steps and we will discuss them today with ministers,” he said, citing among the hypotheses the release of oil reserves “to increase supply during this phase of supply disruptions.” The European Union is also “in constant contact with the Gulf countries” and carries out “intense economic dialogue with the aim of finding a diplomatic solution and promoting de-escalation as soon as possible”
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The Spanish Minister of Economy, Carlos Cuerpo, highlighted how the war in Iran is “already producing tangible effects on our European and Spanish economy”, with a sharp increase in energy and raw material prices. Furthermore, as Cuerpo points out, “since the beginning of the war the price of oil has risen by more than 40%, today exceeding the threshold of 100 dollars a barrel, while the price of gas has increased by around 90%, reaching around 60 euros. “Even if we are still far from the levels recorded during the war in Ukraine, the final impact will largely depend on the duration of the conflict”, he added, underlining that the international situation is “extremely volatile”. “We are already starting to see the effects of this war in our wallets and in the Spanish economy”, underlined Cuerpo. The Spanish government, he assured, is ready to intervene “to protect citizens, businesses and workers”, as already happened during the war in Ukraine, adapting measures to the evolution of the situation. To a question on the hypothesis that the US asks for an easing of sanctions on Russian oil, Cuerpo declared: “Here I believe that this is not the time to speculate on possible sanctions or other measures. We are already in a sufficiently volatile situation due to the war and rather we must all try to calm the waters and ensure that the consequences are as limited as possible for our economies.”
Paris: “Ready to open our oil reserves”
“We are ready to take all necessary measures, including resorting to strategic reserves, in order to stabilize the markets,” said French Finance Minister Roland Lescure. “We will continue to carefully examine how we can stabilize all flows and the entire market. We will study all possible measures, including possibly the release of strategic oil reserves.” Lescure highlighted how the topic was also addressed at the G7 Finance but without reaching a meeting point. German Economy Minister and Vice-Chancellor Lars Klingbeil also expressed his opinion on the French proposal: “This is not yet the right time to do it, but we are ready, also as the Federal Republic of Germany, to do it as part of a coordinated procedure”.
