Economists are warning that the ongoing war in Iran could have severe consequences for the euro and the European economy if the conflict continues beyond the “four weeks” projected by former US President Donald Trump. The hostilities, which began at the end of February, have already triggered an energy price shock, affecting oil, petrol, diesel, and gas. Rising energy costs are hitting consumers and energy-intensive industries such as chemicals and steel, putting additional pressure on the German economy, which was already facing modest growth forecasts.

The euro, currently trading around $1.16, is under particular pressure. Economist Daniel Stelter warned that an extended conflict would further weaken a euro already affected by low growth, high debt, and political uncertainty. “Capital would flow into dollar investments considered safe,” he said. Carsten Brzeski, chief economist at ING Bank, added that if the conflict disrupts oil supplies through the Strait of Hormuz for several weeks, oil prices could exceed $100 per barrel, pushing the euro down to $1.10–$1.12 per dollar. This would represent a 5–8 percent drop, the lowest levels since the 2022–23 energy crisis triggered by the Ukraine war.

Such a decline would make holidays in the US more expensive for Europeans and increase the cost of imports such as oil, electronics, and raw materials. Stelter warned of even more severe scenarios, suggesting that the euro could temporarily fall below parity with the dollar, reaching $0.90–$0.95, if the war leads to prolonged regional instability.

Germany could face particularly serious economic consequences. Stelter said higher energy prices act like an additional tax, reducing consumption and investment. In a prolonged blockade scenario, Germany could fall into a deep recession, with the wider eurozone at risk of at least a technical recession. Extended disruptions would also strain bond markets and interest rates, potentially forcing the European Central Bank (ECB) to intervene more aggressively to prevent a debt crisis.

The war’s impact on global energy supplies could trigger an “energy black swan,” causing sudden shortages and price spikes that ripple through the global economy. German exports could collapse despite a weaker euro if higher energy prices reduce demand in major markets such as China, India, and the US.

The ECB faces a complex challenge: if the conflict is short-lived, it could lower interest rates to support growth. If the war drags on, inflationary pressures from energy prices would limit the bank’s ability to cut rates, leaving the euro under pressure and economic momentum stalled. Stelter said this scenario could lead to stagflation, with rising inflation and falling growth simultaneously.

A rapid end to hostilities within four to five weeks and minimal damage to critical energy infrastructure in Saudi Arabia and Qatar could help stabilize the euro. However, resistance from Iran’s leadership raises the risk of a prolonged conflict with serious economic implications for Europe.

Gas prices in Europe surged on Tuesday as escalating tensions in the Middle East disrupted global energy flows and raised fears of tighter liquefied natural gas supplies, increasing concerns about the region’s fragile energy recovery.

Europe’s benchmark Dutch TTF gas contract climbed above €60 per megawatt hour around 12:30 CET, a sharp rise from the low €30s recorded at the end of last week. The spike followed US and Israeli strikes on Iran, which unsettled global markets and renewed anxiety about potential supply disruptions.

“This has triggered immediate fears of reduced LNG availability to Europe, prompting a rush in spot markets and heightened risk premiums,” said Yousef M. Alshammari, president of the London College of Energy Economics.

Traders are closely watching LNG shipments from Qatar and maritime traffic through the Strait of Hormuz, a key chokepoint for global energy trade. Any disruption to flows through the strait could tighten supply and intensify competition for cargoes, particularly between Europe and Asian buyers.

Europe has reduced its reliance on Russian pipeline gas since Moscow’s invasion of Ukraine, replacing much of that supply with seaborne LNG. While this shift has improved diversification, it has also increased dependence on global shipping routes and spot market cargoes, both of which can become volatile during geopolitical crises.

Qatar accounts for an estimated 12 to 14 percent of Europe’s LNG imports, making developments in the Gulf region particularly significant. Analysts at Brussels-based think tank Bruegel said that even though Europe is less dependent on Gulf oil and LNG than major Asian economies, it remains exposed to global price swings.

Gas storage levels add to the concern. European Union storage facilities are around 30 percent full, lower than at the same point last year. Germany’s inventories stood at about 21.6 percent in late February, with France also reporting levels in the low 20s. Lower reserves could complicate efforts to rebuild stocks ahead of next winter if high prices persist.

Alshammari warned that a prolonged period of elevated wholesale prices could eventually filter through to households and businesses. While many consumers are protected by fixed or regulated tariffs that adjust gradually, sustained prices above €50–60 per megawatt hour could push up electricity and heating bills in the coming months.

Energy-intensive industries such as chemicals, fertilisers, steel, glass and paper manufacturing are likely to face renewed cost pressures. Countries including Germany, Italy and the Netherlands could see competitiveness affected if prices remain high.

Lower-income households in Central and Eastern Europe, as well as parts of southern Europe, may also be vulnerable due to greater reliance on gas for heating and less energy-efficient housing. Governments may need to consider targeted measures if the current disruptions continue and market volatility persists.

An oil tanker was attacked off the coast of Musandam in the Strait of Hormuz on Sunday, leaving four people injured and prompting the evacuation of all 20 crew members, according to Oman’s Maritime Security Centre.

The vessel, named Skylight and flying the flag of the Republic of Palau, was targeted around five nautical miles (9.26 km) north of Khasab Port, Oman authorities said. The incident marked the first reported attack on a ship in the strategic Strait of Hormuz on Sunday morning.

Oman’s Maritime Security Centre confirmed that the tanker’s crew included 15 Indian nationals and five Iranian nationals, all of whom were safely evacuated. The four injured crew members were transferred for medical treatment. Authorities did not immediately provide details on the cause of the attack or the identities of the attackers.

The incident has heightened concerns about shipping safety in one of the world’s most important oil transit routes. The Strait of Hormuz handles a significant portion of global crude oil exports, and any disruption to its operations can have major implications for energy markets.

In response to the attack, major shipping companies have suspended operations through the Strait of Hormuz. Danish shipping and logistics giant Maersk announced on Sunday afternoon that it had halted all future transits through the waterway until further notice. Other operators are reportedly reviewing their shipping schedules and implementing additional safety measures.

The attack comes amid ongoing regional tensions, with the Strait of Hormuz often at the center of geopolitical disputes. Analysts say the incident could lead to further disruptions in global oil supplies and push energy prices higher if shipping companies continue to avoid the area.

Maritime security experts emphasize the need for close monitoring of shipping traffic and coordinated responses to ensure the safety of vessels and crews in the region. The rapid evacuation of Skylight’s crew has been described as a positive example of emergency preparedness, but the attack underscores the continuing risks faced by commercial shipping in the Gulf.

Authorities are continuing to investigate the circumstances of the attack and are coordinating with international maritime agencies to prevent further incidents. The situation remains fluid, and the potential impact on shipping and regional security is likely to unfold in the coming days.