The ECB anticipates a rise in inflation and a slowdown in growth due to the war in the Middle East

The European Central Bank(ECB) 's new projections predict an upturn in inflation, higher than previously predicted, while the rate of GDP growth in the euro area will be lower than anticipated in December due to the impact of the early days of the Middle East conflict.

The new forecasts by ECB technicians, which exceptionally include information obtained until 11 March, indicate in the basic scenario that the inflation rate will be on average 2.6% in 2026 comparedto1.9% in the previous forecast, while in 2027 the price increase in the euro area would be 2%, two tenths higher than projected in December; and 2.1% in 2028, above 2% of the previous forecast.

Similarly, ECB economists predict that underlying inflation, excluding energy and food, will be higher than expected in December, with an average rate of 2.3% in 2026, 2.2% in 2027 and 2.1% in 2028, while the previous forecast reflected increases of 2.2%, 1.9% and 2%, respectively.

In this regard, the ECB has explained that this higher trajectory of price increases mainly reflects the transmission of higher energy costs to underlying inflation, excluding energy and food.

Asfar as eurozone growth is concerned, experts predict that GDP growth will be on average 0.9% this year, three tenths lower than expected in December; 1.3% in 2027, below 1.4% of the previous projection; and 1.4% in 2028, confirming the previous forecast in that case.

This new downward revision, especially by 2026, would reflect the effectsof the\u00A0 war on commodity markets, real income, and global confidence, while the ECB has pointed out that low levels of unemployment, the strength of private sector balances, and public defense and infrastructure spending "should continue to support growth."

The ECB's basic scenario predicts that average quarterly prices for oil and gas will be around $90 per barrel and €50 per MWh, respectively, in the second quarter of 2026, followed by declines in the coming quarters. In line with these cases, the basic scenario predicts an upturn in inflation that would slow purchasing power, consumer spending, and, consequently, GDP growth, especially in the short term.

The longer impact on oil and gas supplies would "raise inflation and reduce growth below benchmark projections." In any case, the ECB has stressed that the implications for medium-term inflation depend primarily on indirect effects and the second round of more intense and sustainable energy turmoil.

In terms of GDP growth, the eurozone 's expansion would fall this year to 0.6%, three tenths below the base scenario, to 1.2% by 2027 and 1.6% a year later.

In its strictest forecast, the ECB foresees a longer and longer suspension of the supply of hydrocarbons, and it is estimated that 60% of the flows of liquefied oil and natural gas would be interrupted as a result of military actions damaging the energy infrastructure, which would delay the restoration of the supply, so that only in the first quarter of 2027 would the situation gradually return to the same situation as before.

"This harsh forecast leads to a stronger and more sustainable energy price crisis, greater uncertainty, and even more complex indirect and second-round effects," the ECB explains, which means that oil prices would reach a maximum of $145 per barrel in the second quarter of 2026, and gas prices of €106 per MWh, before falling at a much slower rate and remaining significantly above the base scenario hypotheses and other projection horizon scenarios.