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Are Europeans preparing to enter a new cost of living crisis when oil and gas prices increase sharply after just a few months of escalating conflict in the Middle East?
Fighting over Iran has entered its fourth month and the economic impacts are spreading far beyond the Middle East. The European Union and the Eurozone are clearly feeling the pressure from a new wave of energy price increases, especially when crude oil and natural gas continue to fluctuate strongly.
Many experts have linked the current situation to the energy shock in 2022 following the conflict between Russia and Ukraine. However, most economists believe that the current context is different and that the risk of uncontrolled inflation is significantly lower.
Table comparing two energy crises
Factors Crisis 2022 Crisis 2026
Main causes Russia - Ukraine Iran and the Middle East
Source of impact Russian gas Oil and shipping
Level of dependence on the EU Very High Medium
Risk of physical shortage Very Large Lower
Recession risk High Medium
Risk of explosive inflation Very high Low to moderate
Why is Europe worried?
The most notable point lies in the Strait of Hormuz, a maritime route that transports about 20% of global crude oil.
Any disruption in this area could cause Brent oil prices to increase sharply, leading to costsFuel, transportation, manufacturing and logistics increased worldwide.
For Europe, this comes at a time when the economy is recovering quite fragile after years of suffering from high inflation, high interest rates and weak growth.
Direct impact on the EU economy
Pre-Crisis Index Present
Brent oil price is about 75 USD/barrel, over 100 USD/barrel at many times
European Gas Prices Stable and Rising Strongly
Shipping costs Normal Increase significantly
EU growth expectations Positive Being revised downward
Inflation pressure gradually decreasing There are signs of increasing again
Businesses are under great pressure
Industries consume a lot of energy such as
• Chemicals
• Steel
• Cement
• Fertilizer
• Aviation
• Sea transportation
are facing higher input costs.
Germany, France, Italy and the Netherlands are the economies most at risk of being affected due to their large industrial scale.
What helps Europe avoid the 2022 scenario
Unlike the previous period, the EU is now much better prepared.
✔ Gas reserves are filled to a high level
✔ The LNG import system is expanded
✔ Dependence on Russian gas decreased sharply
✔ Energy saving policy has been applied for many years
✔ The European Central Bank has more experience controlling inflation
Therefore, most experts believe that it is difficult for Europe to repeat the situation where gas prices increase many times like in 2022.
Economic impact forecast
Oil Price Scenario Impact on the EU
Conflict cools down Below 90 USD/barrel Stable recovery
The conflict lasted 100 - 120 yearsUSD/barrel Growth slows down
Serious disruption of Hormuz Over 150 USD/barrel Recession risk
Regional crisis spreads Above 180 USD/barrel Inflation increases sharply
Long-term perspective
This crisis once again shows that energy is still Europe's strategic weakness.
After the Russia shock of 2022, many people believe that the EU has passed the most difficult period. However, developments in the Middle East show that if just one geopolitical hot spot erupts, the entire world energy market can still shake.
That also pushes Europe to accelerate investment in renewable energy, new generation nuclear power, green hydrogen and energy storage solutions to reduce dependence on external supplies.
Illustrating the impact of oil prices
️ Brent oil 75 USD/barrel
⬇️
Transportation costs are stable
⬇️
Commodity prices are stable
️ Brent oil 120 USD/barrel
⬇️
Logistics costs increased sharply
⬇️
Production costs increase
⬇️
Consumer prices increased
The Iran war has not yet created an energy crisis as severe as 2022, but it is reminding Europe that energy security remains one of the determining factors in the economic health of the entire region over the next decade. ⚡
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