I just saw the statements from the EU Commissioner for Economy and honestly, the outlook they paint is quite concerning. On April 9th, Valdis Dombrovskis warned the European Parliament about a very real risk: stagflation could severely impact the European economy in the coming months.

What’s interesting is that although there were ceasefire announcements in Iran this week, EU analysts remain very cautious. Geopolitical uncertainty is still present, and that is creating inflationary pressures while growth slows down. It’s exactly the combination no one wants to see in an economy.

According to Brussels’ analysis, if supply disruptions continue in the short term, economic growth could fall between 0.2 and 0.4 percentage points below fall projections, while inflation would rise by approximately 1 percentage point. But here’s the most critical part: if these disruptions are prolonged and intensify, stagflation could be much more severe. By 2026 and 2027, growth could be delayed by an additional 0.6 percentage points, with even stronger inflationary pressures.

What catches my attention is that Dombrovskis was very clear in differentiating scenarios. A brief disruption is not the same as a prolonged one. And frankly, considering the current geopolitical volatility, the risk of stagflation is not an outlandish scenario. Europe is at a crossroads: it needs to maintain growth but also control inflation. If supplies are further constrained, that equation becomes almost impossible to solve.