Confindustria warns of Italian recession if the Middle East war continues
According to Confindustria, the Middle East war has already cut Italian growth by 0.2 points. If the conflict lasts until the end of 2026, the country could face a recession of -0.7%.
| Sectors | Energy Issues, Oil, Transport & Storage |
|---|---|
| Themes | Policy & Geopolitics, Energy Security |
| Countries | Italy |
The Middle East war has already cut Italian economic growth by 0.2 points, according to the research center of Confindustria, Italy's main employers' federation. If the conflict persists until the end of 2026, Italy could enter recession, with gross domestic product (GDP) contracting by an estimated -0.7%. Trump extends Iran ultimatum as oil rebounds to 100 dollars per barrel, a sign of persistent market nervousness over regional tensions. The closure of the Strait of Hormuz is driving up energy costs and spreading risks across the broader economy, in a context where oil prices fall sharply after a US-Iran 15-point peace plan.
Three scenarios depending on the duration of the conflict
Confindustria has modeled three trajectories for the Italian economy. If hostilities stop at the end of March, GDP would grow by 0.5% in 2026, down from the 0.7% forecast before the escalation. If the war continues into the second quarter, the economy would stagnate. A prolongation until the end of 2026 would result in a recession of -0.7%.
The first months of the year contrasted sharply with this deteriorating outlook. During the first two months of 2026, Italian economic indicators were positive, supported by household consumption and investment, following a solid end to 2025. It was the outbreak of the Middle East conflict that reversed this dynamic, according to the employers' federation.
An energy bill that could rise by 21 billion euros
The impact on Italian businesses could be substantial if the conflict continues. According to Confindustria's projections, their energy bill would increase by 21 billion euros in 2026. Households, facing uncertainty, could reduce spending, while business investment risks declining.
Export growth should slow to +0.6% in 2026, compared to +1.2% recorded in 2025, in the scenario where the conflict ends in March. Inflation is expected to reach 2.5% for the full year 2026, against 1.5% in 2025, mainly due to rising energy costs linked to the closure of the Strait of Hormuz. This inflationary surge would erode Italian household purchasing power and compress the margins of exporting companies.
A weakened labor market
The labor market could feel the knock-on effects of this slowdown. The unemployment rate risks rising to 5.8% for the year 2026, after reaching a historic low of 5.1% in January. This potential deterioration follows a period of employment dynamism in Italy, as Confindustria notes. It illustrates how quickly an external energy-related shock can spread throughout the entire economy.
