The Goldman Sachs Institute is cutting growth forecasts for the European Union in the face of the Middle East conflict. The Italian economy could lose 14 billion euros, and the German chemical industry is posting disastrous results, raising real concerns about the onset of stagflation.

Lowered growth forecasts

Goldman Sachs reduces GDP estimates for the EU, identifying Italy as the country most at risk of losses amounting to 14 billion euros.

Crisis in German chemicals

The VCI association reports a 2.9% drop in production and warns of persistent disruptions in supply chains.

Risk of stagflation

Experts warn of the simultaneous occurrence of high inflation and economic stagnation in the eurozone.

Tensions in the Persian Gulf

Attacks on tankers have driven oil prices towards $100 per barrel, threatening supplies through the Strait of Hormuz.

The Goldman Sachs Institute has lowered economic growth forecasts for the European Union, identifying Italy as the country most affected by the ongoing armed conflict in the Middle East. According to the bank's analysts, the escalation of military actions between the US and Israel and Iran, including attacks on tankers and the blockade of the Strait of Hormuz, directly impacts European financial stability. The Italian statistical office Istat confirmed on March 13, 2026, that a clear downward trend is emerging in the global economy, and Italy's GDP could shrink more drastically than that of its EU partners. The Italian economy has been struggling for years with high public debt and low growth dynamics, making it particularly vulnerable to external energy shocks. Previous fuel crises, such as the one in 1973 or after Russia's invasion of Ukraine in 2022, led to a sharp rise in inflation and industrial slowdown in Italy. The current geopolitical situation compounds the structural problems of the eurozone, which has been recording marginal GDP growth since 2025.

The German IfW Institute in Kiel has also revised its economic growth forecasts downward, citing persistently high raw material prices. Particularly alarming signals are coming from the chemical sector, where the industry association VCI warns of serious disruptions in supply chains and mounting inflationary pressure. Chemical production in Germany fell by 2.9% in the fourth quarter of 2025 compared to the same period a year earlier, and industry revenues in the same period decreased to 51.8 billion euros. The situation is worsened by a sharp rise in oil prices, which, following Iranian strikes on tankers, approached the $100 per barrel mark.

In the face of the energy crisis, economic advisors in Germany have begun recommending the implementation of fracking as a remedial measure to ensure supply security. Meanwhile, in Italy, experts warn of economic losses that could reach up to 14 billion euros due to drastic energy price hikes. The term stagflation, describing the worst possible scenario for the continent, is increasingly appearing in public debate. „Germany's chemicals lobby sees serious disruptions from war in the Middle East. VCI said on Friday it expects potential persistent disruptions” — VCI via Reuters

Escalation of the 2026 economic crisis: December 31, 2025 — Production decline; March 4, 2026 — Inflation warning; March 12, 2026 — Forecast cuts; March 13, 2026 — Istat report

Mentioned People

  • Wolfgang Große Entrup — Managing Director of Verband der Chemischen Industrie (VCI)