Recession fears in Europe as Eurozone business activity slows amid Iran war

The war in West Asia has sparked fears of recession in Europe as business activity in the Eurozone slowed in March following the start of the conflict on February 28, leading to a surge in energy prices and causing significant supply chain disruptions, according to a survey published on Tuesday (March 24).

The HCOB Flash Eurozone Purchasing Managers' Index (PMI), published by S&P Global, an important gauge of the overall health of the economy, registered a significantly lower figure of 50.5 this month, down from 51.9 in February.

A reading above 50 indicates growth, while a figure below 50 shows contraction.

Iran has effectively closed the Strait of Hormuz in retaliation against the United States and Israel, through which nearly 20 per cent of global oil transits. Brent crude is oscillating between $101 and $104 per barrel, putting immediate pressure on input costs for European firms and forcing several countries to take emergency measures such as rationing and prioritising gas.

The 21-country Eurozone bloc, which includes Germany, France and Austria, has come under a “double shock”, with the West Asia conflict and the protracted war in Ukraine creating a period of stagflationary pressure.

On Monday, Donald Trump announced in a social media post a five-day postponement of all planned military strikes against Iranian power plants and energy infrastructure. The pause is intended to provide a window for ongoing diplomatic talks aimed at reaching a “complete and total resolution” of hostilities in the region.

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Notably, the US President underlined that the instruction to the Department of Defence is contingent upon the continued success of these detailed and constructive meetings, which are scheduled to continue throughout the week.

However, Iran officially dismissed Donald Trump’s assertion that the two countries are engaged in “very good and productive” conversations to resolve the war.

The pause comes after 24 days of intense fighting, which began on February 28 following a joint US-Israeli bombing campaign that targeted top Iranian leadership, including the killing of Supreme Leader Ayatollah Ali Khamenei and senior security chief Ali Larijani, along with several high-ranking military commanders.

Despite the US and Israel targeting its leadership and critical infrastructure, Iran remains defiant. The country has adopted a tit-for-tat strategy, attacking oil and energy facilities across Gulf nations and surprising the US by targeting the Diego Garcia military base, around 4,000 km from Iran. This demonstrated Tehran’s missile capabilities, which the US had previously claimed were significantly reduced in its strikes.