Eurozone Growth at Risk from Geopolitics and Energy Volatility
The European Central Bank (ECB) has issued a warning about the potential risks to growth in the eurozone due to geopolitical instability and high energy prices. Despite the recent memorandum of understanding between the US and Iran, the situation remains fragile, with new military attacks causing oil prices to rise again.
The price of Brent crude oil initially fell sharply after the agreement was reached, but has since risen to a level 1 per cent lower than that recorded on June 11. The ECB's economic bulletin highlights the downside risks to growth and upside risks to inflation in the euro area.
The bank warns that further disruptions to energy supplies could keep prices high, weighing on real incomes, consumption, and investment. A deterioration in market confidence, tighter credit conditions, and increased trade friction could also weaken demand, exports, and supply chains.