Recent attacks on oil and gas infrastructure have already driven up prices, raising concerns about inflation, trade disruptions and broader economic slowdown across both advanced and emerging markets.

Across Europe, memories of the economic fallout from the Russia-Ukraine war are shaping concerns about a fresh energy shock.

Germany, with its industry-heavy economy, is particularly exposed to higher energy costs. Although manufacturing activity has shown signs of stabilisation after a prolonged downturn, rising input costs and weaker global demand could weigh on exports. While Berlin has introduced stimulus measures, fiscal constraints may limit further support.

Italy faces similar vulnerabilities, given its large manufacturing base and relatively high dependence on oil and gas in its energy mix.In United Kingdom, electricity prices are closely tied to gas costs, which have risen sharply since the conflict began.

While a price cap may soften the immediate impact on households, economists warn it could lead to prolonged high borrowing costs and strain public finances.

Japan remains highly vulnerable due to its reliance on imported energy, sourcing around 95% of its oil from the Middle East. Nearly 90% of these supplies pass through the Strait of Hormuz, making supply disruptions a critical risk.

The impact is compounded by a weak yen, which increases the cost of imports and adds to inflationary pressures affecting food and household goods.

In the Gulf, the conflict is expected to have a direct economic impact. While higher oil prices would typically boost revenues, disruptions to shipping routes could offset gains if exports are constrained.

Countries such as Kuwait, Qatar and Bahrain rely heavily on the uninterrupted flow of hydrocarbons through the Strait of Hormuz.

Any sustained blockage could hinder their ability to access global markets.The conflict could also affect remittance flows from expatriate workers, a key source of income for many households in the region.

Among large emerging economies, India is particularly exposed. It imports about 90% of its crude oil and nearly half of its liquefied petroleum gas, with a significant share transported via the Strait of Hormuz.

Higher energy prices could widen India’s trade deficit, fuel inflation and complicate monetary policy, especially if global financial conditions tighten in response to the crisis.

As energy markets remain volatile, the extent of the economic impact will depend on the duration of the conflict and the degree of disruption to global supply chains.

Rising energy costs linked to the conflict and fears of a renewed refugee influx have elevated the Middle East crisis to a central issue at the summit, officials said, alongside efforts to secure agreement on a 90 billion-euro ($104 billion) loan intended to support Ukraine’s war-strained finances.

Energy and Middle East concernsLeaders are weighing options to mitigate economic shocks from the conflict, including proposals from the European Commission for a “toolbox” of measures aimed at lowering energy prices across the 27-nation bloc. A senior EU diplomat said no single policy would suit the bloc’s diverse energy markets, underscoring the complexity of the response.

Several EU countries have resisted calls from U.S. President Donald Trump to deploy military assets to safeguard the Strait of Hormuz, a critical artery for global shipments of oil, gas and fertilizer, reflecting caution over deeper involvement in the conflict.

The summit is also focused on a standoff between Hungarian Prime Minister Viktor Orbán and other EU leaders over the Ukraine loan agreed in principle in December. Orbán withdrew support after disruptions to the Druzhba oil pipeline earlier this year, citing energy security concerns.

“If there is no oil, there is no money,” Orbán said in a social media post, linking Hungary’s backing of the loan to stable energy supplies.

EU officials are seeking to persuade Hungary and Slovakia, whose Prime Minister Robert Fico has also adopted pro-Russia positions, to lift their objections. European Commission President Ursula von der Leyen has preposed EU funding to repair the Druzhba pipeline and develop alternative supply routes for both countries.

Ukrainian President Volodymyr Zelensky said blocking the loan was “absolutely unfair,” stressing that the funds are essential as Kyiv faces a deepening budget crisis amid its war with Russia, which began in February 2022.

German Chancellor Friedrich Merz urged swift agreement on both the loan and a new package of sanctions against Moscow, warning against allowing domestic political considerations within member states to hinder collective action.

He said the EU must “increase the pressure on Moscow together,” in coordination with the United States, as leaders gather to reconcile internal divisions with mounting geopolitical and economic pressures.