The European Union economy is at risk of stagflation as a result of the ​surge in energy prices caused by the ‌US-Israeli war on Iran, European Economic Commissioner Valdis Dombrovskis has said, Reuters reports.

“The outlook is clouded by profound uncertainty, but it ​is clear that we are at the ​risk of a stagflationary shock, that is to ⁠say, a situation where a slower growth ​coincides with a higher inflation,” Dombrovskis told a news ​conference after a meeting of EU finance ministers.

“This is the case even if the disruptions in energy supplies were ​to be relatively short-lived. In such a scenario, ​our analysis suggests that the EU growth in 2026 could ‌be ⁠around 0.4 percentage points lower than projected in our autumn economic forecast, and inflation could be up to one percentage point higher,” he said.

“If ​disruptions prove more ​substantial and ⁠longer lasting, the negative consequences for growth would be even greater. Growth ​could be up to 0.6 percentage points ​lower ⁠in both 2026 and 2027,” he said.

He said it was now clear that the scale, severity ⁠and impact ​of the war had increased ​since EU finance ministers last met a little over two ​weeks earlier.