Eurogroup to discuss economic impact of Middle East conflict, rising oil prices

BRUSSELS

The European commissioner for economy and productivity said Monday that eurozone finance ministers will assess the economic implications of the conflict in the Middle East, noting that releasing strategic oil reserves is among the options being considered to counter rapidly rising oil prices.

Speaking to reporters ahead of a Eurogroup meeting of euro area finance ministers in Brussels, Valdis Dombrovskis said the economic impact of the conflict will be a key item on the agenda.

“The focus of our discussions is going to be the economic impact of the conflict in the Middle East,” Dombrovskis said, noting that the scale of the impact will largely depend on the duration of the conflict and whether it spreads further across the region.

He said that under a milder scenario in which the conflict is brought under control within a few weeks, the effects on the global and European economies would likely remain limited.

He warned, however, that a prolonged disruption to shipping through the Strait of Hormuz or attacks targeting energy infrastructure in Gulf countries could trigger a significant stagflationary shock for both the global and European economies.

He said that would lead to higher energy prices, increased inflation, loss of confidence, supply chain disruptions and tighter financing conditions.

Dombrovskis added that the sooner the conflict ends, the more limited its economic impact will be.

“The primary channel of impact on the economy is obviously through energy supply disruptions and energy prices," he said, adding that eurozone ministers would hold a more detailed discussion later on the impact on energy markets and possible policy responses.

Dombrovskis emphasized that the European Commission is already working on potential measures, adding that one of the options under consideration is releasing oil reserves to ensure additional supply during this disruption.