The prolongation of the conflict in Iran and the associated risks to global oil supply are generating increasingly visible effects on European economies, including Romania’s. Rising oil prices mean not only higher energy bills, but can also slow down the entire economy through a chain effect that starts with reduced consumption and extends to postponed investments, according to an analysis by specialists from Romanian Economic Monitor (RoEM)-UBB FSEGA, a research project of the Faculty of Economics and Business Administration (FSEGA) within Babeș-Bolyai University (UBB) in Cluj-Napoca, quoted by Romania Journal.
“In a context marked by high volatility in energy markets, rising fuel prices are becoming one of the main channels through which geopolitical shocks are transmitted to the real economy. Higher oil prices can slow economic growth through three main mechanisms. The first is direct: higher prices erode purchasing power, leading to reduced consumption and, implicitly, a slower pace of economic growth. The other two channels are indirect. On one hand, the slowdown of the global economy, especially the euro area, Romania’s main trading partner, also impacts the domestic economy. On the other hand, rising economic uncertainty leads both companies and households to adopt cautious behavior, delaying or reducing investments and non-essential spending,” explains Csaba Bálint, researcher within the RoEM-UBB FSEGA team.
The escalation of the war in Iran has triggered an immediate reaction on international markets, reflected in the sharp increase in oil prices, as well as other energy products. To provide a benchmark for the magnitude of the current energy crisis, the RoEM-UBB FSEGA team drew a parallel with the last similar crisis in 2022, at the beginning of Russia’s invasion of Ukraine.
Thus, at the start of the Russia–Ukraine conflict on February 23, 2022, Brent oil stood at $96.84/barrel, reaching $119.03/barrel one month later, an increase of 22.91%. In the same period, TTF natural gas prices rose from €88.89/MWh to €111.61/MWh (+25.55%). By comparison, in the case of the US/Israel–Iran conflict, the dynamics were significantly more pronounced. Brent oil rose from $72.48/barrel on February 28, 2026, to $115.86/barrel one month later (+59.85%), while TTF gas increased from €31.96/MWh to €54.81/MWh, marking a 71.50% rise.
“In 2022, the gas price crisis intensified only after a few months, in the autumn period, and a similar scenario could occur this year as well if the Iran war escalates and extends into autumn. It is important to highlight that the disruption caused by the closure of the Strait of Hormuz is approximately 15 to 20 times greater than the supply impact observed in the first months of the Ukraine war, making it a much larger direct threat to global oil availability,” says Bálint-Zsolt Nagy, RoEM-UBB FSEGA researcher.
Furthermore, the RoEM-UBB FSEGA analysis shows that in 2022, the Romanian government had more fiscal space for interventions/subsidies, as the state budget had already entered a consolidation path after the pandemic, at 6.7% of GDP in 2021, while at the end of last year the deficit was higher, at 7.6%.
How economic growth may be affected
Analyzing the impact of these developments on Romania’s economy, the RoEM-UBB FSEGA team identified three main channels through which the Middle East conflict can negatively affect economic growth:
- High inflation. Although Romania has a certain degree of energy independence compared to other countries in the region, domestic prices are aligned with international market dynamics, and higher oil prices quickly translate into increased transport, production, and logistics costs, affecting company competitiveness and household budgets. These tighter budgets put additional pressure on consumption, already declining compared to the previous year, limiting economic growth.
- Reduced exports. High oil prices and global geopolitical uncertainty negatively affect euro area growth – the main export destination for Romania’s economy. The weak economic outlook of countries in this region directly impacts Romanian exporters, and a potential decline in exports slows GDP growth.
- Economic uncertainty. In the current geopolitical and economic context, with many uncertainties, companies tend to delay planned investments to remain flexible and prepared for unexpected scenarios. Households also prefer to save by postponing or reducing investments and consumption. At the state budget level, investors become more cautious, which may increase the cost of financing public debt.
“All these factors worsen the outlook for the Romanian economy in 2026. Considering these channels of influence, we estimate that every 10% increase in Brent oil prices may add approximately 0.3 percentage points to Romania’s annual inflation rate,” says Csaba Bálint.
Effects of policy measures
Regarding mitigation measures, RoEM-UBB FSEGA specialists consider that capping fuel prices by limiting commercial markups represents only a short-term solution, intended to give companies and households time to adapt. In the long term, however, such interventions may generate market imbalances, including risks of product shortages, making them unsustainable.
“At present, the fundamental issue is the reduction in available oil supply due to blockages in the Strait of Hormuz, which directly translates into higher fuel prices. The government has already intervened to mitigate the initial shock on fuel markets through temporary measures valid until June 30, 2026, thus providing time for economic agents to adapt. At the same time, since the structural problem cannot be managed in the medium and long term through similar interventions, the essential role of any government is to ensure that adopted policies do not worsen existing fiscal imbalances. In a fragile fiscal context, marked by limited room for maneuver, the calibration and sustainability of fiscal-budgetary measures become critical,” adds Csaba Bálint.
The RoEM-UBB FSEGA team believes that a lasting resolution of the Iran conflict could lead to stabilization of energy markets within one to two months. However, even in this optimistic scenario, the precedent created by geopolitical and geo-economic tensions, combined with the perceived risk of renewed conflict, could continue to influence energy market developments.
Comments
comments
