European Union Expects Oil and Gas Prices to Stay High Through 2027

European Union officials expect oil and gas prices to remain above pre-Iran War levels at least until the end of 2027. The rise in energy prices is projected to push up prices for other goods and services across Europe.

Valdis Dombrovskis, European Commission Vice-President for the Economy, said the surge in energy prices is the main driver behind higher inflation projections region-wide. EU inflation is now expected to reach 3.1 percent this year and 2.4 percent in 2027, well above the previous forecast of 1.9 percent for this year.

“We expect that energy inflation will gradually spill over into a range of sectors,” Dombrovskis said after a meeting of finance ministers from 21 euro area member states on Friday (22 May 2026).

The euro area is the group of EU member states that use the euro. The finance ministers are part of the Eurogroup.

According to Lagarde, the rise in energy prices will have a delayed effect on prices of other goods.

“And most likely the price level will be higher at the end of this crisis when we look at the end of this crisis,” Lagarde said.

Lagarde noted that the European Central Bank will take “all the steps necessary” to keep price stability in line with the 2 percent inflation target. Nonetheless, she did not signal a firm hint of a rate rise in the near term.

“We will continue to follow a data-dependent, meeting-by-meeting approach to determine the most appropriate monetary policy stance to achieve our mid-term 2% target,” Lagarde said.

The Strait of Hormuz is a key route for global energy trade, with about one-fifth of global oil and gas supplies passing through it. The war in Iran has disrupted global energy routes, triggering a surge in oil and gas prices. The impact is felt directly by Europe, which still depends on energy imports.