An energy crisis from the war in the Middle East is set to deliver a punishing blow to Europe's economy, in a bitter twist for a region that had been hoping to accelerate growth this year.
Policymakers are scrambling to provide relief, but their options are more limited than during Russia's invasion of Ukraine four years ago.
Rising energy costs threaten to accelerate deindustrialization as energy-intensive industries such as chemical makers close factories and shift production to China or the U.S.
European households and businesses are facing soaring borrowing costs, and government debt in the U.K. and France is at or near the highest share of GDP in at least six decades.
Already, the rise in oil and gas prices during the first 10 days of the conflict cost European taxpayers an additional three billion euros, equivalent to about $3.4 billion, in fossil-fuel imports.
The economic implications aren't as grave as after Russia's invasion of Ukraine, but it could slow an already moribund U.K. economy, shaving growth to 1% versus 1.5% before the Iran war in a "baseline" scenario.
