EBRD Warns Prolonged Iran War Could Seriously Hurt European Economy

Gate News message, April 14 — The European Bank for Reconstruction and Development (EBRD) warned that a prolonged war in Iran will have a “serious impact” on the economy, especially in Europe, according to EBRD President Odile Renaud-Basso in an interview with Euronews. The warning follows failed negotiations over the weekend between U.S. and Iranian officials, with a two-week ceasefire set to expire on April 21. The conflict, which began in late February, effectively closed the Strait of Hormuz, a waterway accounting for approximately 20% of global oil and gas shipments.

The EBRD estimates that if oil prices remain around $100 per barrel, economic growth will shrink by 0.4% and inflation will rise by 1.5% in the countries where the bank operates. Renaud-Basso stated that if the Strait of Hormuz remains blocked for an extended period or if more production capacity is destroyed in the Gulf region, the economic impact will be “much more serious.” She also noted that EU governments are “much more limited” in fiscal terms compared to previous crises such as the COVID-19 pandemic or Russia’s 2022 invasion of Ukraine.

The EBRD plans to allocate €5 billion for investments in nations most affected by the conflict, from Egypt to Armenia, and is prepared to support all other economies in its operational region. The bank, founded in the early 1990s to support former Eastern Bloc nations’ transition to market economies, now operates in over 30 countries across three continents.

Meanwhile, European Commission President Ursula von der Leyen announced on Monday that the EU will propose easing state aid rules by the end of April to help member states deal with the energy crisis. The EU’s energy bill has increased by €22 billion since the war began. The bloc’s response package includes filling gas storage facilities, adopting temporary tax cuts, upgrading electricity networks, and updating the Emissions Trading System (ETS).