According to an analysis by Oxford Economics cited by the Financial Times, our country could suffer the strongest impact among the advanced economies. The reason? The strong dependence on imported energy, especially gas.
The new escalation of the war in the Middle East risks reigniting a global energy crisis. And of all the advanced economies, Italy is the most exposed to the effects on gas and oil prices.
According to an analysis published by Financial Times based on Oxford Economics estimates, in the event of a military escalation in the Persian Gulf, Italian inflation could exceed 3% by the end of 2026, more than a percentage point higher than forecasts before the conflict.
In the rest of Europe the impact would be more limited: the estimated increase in inflation in the euro area would be around 0.4 percentage points. For Italy, however, the energy shock risks being much more intense.
Why is Italy more vulnerable?
The fragility of our country depends above all on the structure, needless to say, of the economic system.
Italy is in fact the second manufacturing power in the eurozone, but at the same time it is heavily dependent on imported energy, in particular gas. Much of the supplies come from energy routes that cross the Middle East, one of the most unstable geopolitical areas on the planet. When tensions rise in that region, the effect on energy markets quickly spreads to Europe as well. And in Italy the impact is felt immediately:
Furthermore, European gas is already more volatile than American gas, while the price of fuel has a very significant weight in the continent’s energy system.
The expected scenario: oil at 80 dollars
Oxford Economics’ forecasts are not based on extreme scenarios. The hypothesis considered is that of moderate tensions and temporary interruptions of energy routes.
In this case the price of oil could:
Even a relatively moderate scenario, however, could be enough to reignite inflation. In the week following the start of the conflict, in fact:
One of the main fears concerns the possible blocking of shipments in the Strait of Hormuz, one of the most important passages in the world for the transport of oil and gas.
Not just energy: the risk for global chains
The shock does not only affect energy prices. There is also a second channel of crisis transmission: global logistics chains.
Many trade routes between Asia and Europe pass through:
If commercial traffic is slowed down or diverted, the consequences are immediate:
For a manufacturing country like Italy, strongly integrated into global chains, this means smaller margins for companies and higher final prices.
In recent years there has been a lot of talk about reshoring, i.e. the return to the homeland of delocalized production, especially after the pandemic and the microchip crisis. But the process never really took off, leaving the European economy still very exposed to geopolitical tensions.
Who loses and who gains from the energy crisis
Not all countries, however, will suffer the same impact.
The United States, for example, has become:
This means that rising energy prices can even benefit part of their economy.
According to Oxford Economics, in the USA:
Canada would be the least affected country among those analyzed, while Norway, a large energy exporter, could even benefit economically from the increase in prices.
The eurozone and the United Kingdom would instead see an increase in inflation of more than half a percentage point. In this ranking, however, Italy remains the most exposed country.
The risk of stagflation and the role of the ECB
A new wave of inflation would also have effects on monetary policy.
If energy prices rise again, the European Central Bank may be less inclined to reduce interest rates.
This scenario would have direct consequences:
The risk is that of stagflation, that is, a combination of high inflation and weak economic growth.
The Italian energy hub
This new crisis brings a structural problem of Italy back to the center: the strong dependence on imported fossil fuels.
In 2022, during the energy crisis following the Russian invasion of Ukraine, Italy paid around 106 billion euros more for rising gas prices, according to data from the Mestre-based CGIA.
A huge figure, almost equivalent to the overall expenditure of the Superbonus, but without producing any structural benefit for the country’s energy system.
The only real way out: renewables and energy efficiency
The new crisis demonstrates once again how fragile an energy system based on imported fossil fuels is.
Any geopolitical tension can immediately transform into:
For many analysts, there remains only one structural solution: accelerating the energy transition.
Invest in:
it means reducing dependence on gas and oil and making the economy much less vulnerable to geopolitical shocks.
In other words, energy independence does not come from fossil fuels, but from the ability to produce clean energy directly on the territory.
