Energy Shock Incoming? Iran War Could Slam Dutch Economy Hard
The war in the Middle East could drive higher inflation and slow economic growth in the Netherlands, according to new projections from De Nederlandsche Bank (Dutch Central Bank).
The central bank warned that although the impact may not reach the extreme levels seen during the 2022 energy crisis, rising energy prices and instability linked to Iran could still significantly affect households. In particular, the blockade of the Strait of Hormuz poses risks to global oil and gas supplies.
Energy prices remain far below the peak of 2022, when gas costs surged by more than 250 percent to over €300 per megawatt-hour. Current prices are estimated at around €50 to €60, but continued conflict could still strain household budgets.
In a severe scenario, prolonged high energy prices could reduce household disposable income by up to 6 percentage points, with lower-income groups hit the hardest. As energy costs rise, other goods and services are also expected to become more expensive, putting additional pressure on consumer spending.
DNB president أولاف سلييبن said it is “wise” that the government is not rushing into compensation measures. He stressed that while support for households may be necessary, authorities should first assess the real impact before making financial commitments.
Even in the worst-case scenario, the economic damage is expected to remain below the levels seen in 2022. In milder conditions, household purchasing power may decline by only about 1 percent, partly due to existing fixed or variable energy contracts that delay the impact of price increases.
The central bank estimates inflation could rise by at least 0.5 percent this year and next, while in a more severe scenario it could increase by up to 1.6 percent this year and 2.8 percent the following year. Economic growth could also slow significantly, potentially dropping by around 0.8 percent.
أولاف سلييبن emphasized that much depends on how long and how intensely the conflict continues. He also warned that broader regional escalation could have deeper economic consequences and even pose risks to financial stability, despite the current resilience of Dutch financial institutions.