European Central Bank: High oil prices may cause the Eurozone growth rate to decrease by 0.4 percentage points.

The European Central Bank released a report on the 24th saying that the increase in oil prices caused by the Middle East conflict is expected to drag down the actual GDP growth rate of the Eurozone by 0.4 percentage points in the first year of the impact. The report pointed out that with the obstruction of oil transportation in the Strait of Hormuz and the decrease in oil production in the Middle East region, Brent crude oil prices have significantly increased. For Eurozone countries that rely on energy imports, high oil prices usually mean higher production costs, lower purchasing power for residents, and therefore have a significant impact on economic activities. The report also believes that the high uncertainty brought about by geopolitical conflicts may cause businesses to delay expansion, equipment upgrades, and recruitment plans, thus inhibiting investment activities. Although the Eurozone's economic dependence on oil has decreased in recent years, investors' sensitivity to geopolitical risks has not significantly weakened. According to the report, the related impact of high oil prices still remains uncertain and will ultimately depend on the extent and duration of the oil price increase. If the duration of high oil prices exceeds market expectations, or if the conflict further impacts the global supply chain and spills over into the natural gas market, the Eurozone economy will face greater downward pressure.