Eurozone How Bad Is The Iran Shock

The Eurozone faces a mild economic impact from rising energy prices following geopolitical tensions in Iran. Unlike the 2022 energy crisis, the current shock is projected to cause only two quarters of stagflation before returning to growth.

Key Takeaways

• 1.The economic impact of the 'Iran shock' on the Eurozone is expected to be limited to two quarters of mild stagflation, significantly less severe than the 2022 energy crisis.
• 2.Energy import costs are rising but remain well below the peaks seen during the 2022 Russian gas supply shock.
• 3.Berenberg expects the ECB to pause interest rate hikes for the remainder of 2026 and 2027 as inflation pressures recede.

Table of Contents

• Eurozone: how bad is the Iran shock?
• Taking stock
• Paying the bill
• No repeat of 2022
• The damage
• Upside potential

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