Europe is entering a period of heightened economic pressure amid rising energy prices and tensions in the Middle East, warns the European Bank for Reconstruction and Development (EBRD). The institution has revised down growth forecasts for the 40 economies in which it invests, as high energy costs and widening gaps with the United States, where energy is up to six times cheaper, hurt competitiveness and slow economic growth.
EBRD: Europe pays six times more for energy. Archive photo
In the “Regional Economic Prospects” report published on Thursday, the EBRD worsened the economic outlook for the 40 countries in which it is active, showing that the escalation of conflict in the Middle East is a major source of disruption to the global economy.
According to the new estimates, the region's economy would grow by 3.1% in 2026, down from 3.4% in 2025 and 0.5 percentage points below the February forecast. For 2027, the institution anticipates a slight return to 3.6%, but this value is also slightly lower than the previous estimate, by 0.1 percentage points.
In the first quarter of 2026, economic growth in the 40 analyzed economies slowed to 2.9% at an annual rate, which confirms the trend of slowing economic activity.
Global energy shock: more expensive oil and gas, risk in the Strait of Hormuz
The EBRD points to rising oil and gas prices amid growing geopolitical tensions as the main causes of the economic slowdown.
The report points out that possible disruptions to supplies through the Strait of Hormuz, one of the most important global energy routes, amplifies risks in international markets.
At the same time, the widening differences between energy costs in Europe and those in the United States directly affect the competitiveness of European companies, especially in energy-intensive industries.
Europe, major competitive disadvantage compared to the United States
The EBRD notes that electricity prices in Europe remain significantly higher than in the United States, where energy is up to six times cheaper.
This difference causes structural changes in the economy, with a gradual migration of industrial production to sectors with low energy consumption and a loss of competitiveness for energy-intensive industries.
The report shows that this trend is visible both in the advanced economies of the European Union and in the member states where the EBRD actively invests.
Affected economies: Romania, Turkey and Ukraine among those targeted
The EBRD report notes that several economies performed below expectations, including Egypt, Kazakhstan, Romania, Turkey and Ukraine.
EBRD Chief Economist Beata Javorcik explained that the current geopolitical context has exacerbated already existing vulnerabilities.
“The conflict in the Middle East has caused a further shock to regions already affected by weakness in industry and fragile fiscal positions.”she declared.
The EBRD also shows that inflation accelerated between February and April 2026, rising to an average of 6.4%, up 1.2 percentage points.
The institution blames this development on the increase in the price of energy and food, but also on the effects of the depreciation of some currencies against the dollar, which have increased import costs in several emerging economies.
Support measures: subsidies and tax breaks in two-thirds of states
The EBRD report shows a global economy weakened by high energy costs and geopolitical tensions. The major differences between Europe and the United States in terms of energy prices continue to affect industrial competitiveness and slow the pace of growth, while governments try to temper the impact with support measures that put additional pressure on budgets.
Almost two-thirds of the countries in which the EBRD invests have introduced measures to support the population, including energy subsidies and tax cuts.
However, the report warns that such policies may put additional pressure on public budgets, with many states already facing fiscal imbalances.
