EBRD Chief Economist Javorcik Says Energy Prices Will Remain Elevated as Middle East Tensions Rise
European economies face sustained pressure from higher energy prices, EBRD chief economist Beata Javorcik warns amid Iran-related risks.
Immediate warning from EBRD chief economist
Beata Javorcik, the chief economist at the European Bank for Reconstruction and Development, said energy prices are likely to stay higher for an extended period. Her assessment links the persistence of price pressure to geopolitical tensions in the Middle East that are affecting global LNG and oil markets.
Javorcik framed the prospect of prolonged price elevation as a structural risk rather than a short-lived shock, stressing that policymakers should treat the current environment as the new baseline for planning. Her comments underscore rising concern in multilateral institutions about supply disruptions and their knock-on effects for industry and consumers.
Geopolitical strains tightening global supply lines
Analysts point to renewed frictions involving Iran and the US-Israel conflict as a key driver behind recent market volatility in liquefied natural gas and crude oil. Facilities and shipping routes in the Gulf and nearby chokepoints have become focal points for traders reassessing risk premia on energy shipments.
Disruptions that once seemed episodic now feed into expectations of sustained scarcity during peak demand periods, which pushes buyers to secure cargoes well in advance. That behavior can amplify price swings and create persistent upward pressure on wholesale energy costs.
Implications for European industry and competitiveness
Europe’s manufacturing and industrial sectors face a difficult adjustment as elevated energy prices raise production costs and squeeze margins. Javorcik urged governments to re-evaluate industrial policy tools to shield strategic capacities while avoiding inefficient long-term subsidies.
Higher input costs could accelerate restructuring in energy-intensive industries, favoring firms with access to cleaner, cheaper fuels or those able to pass costs through to end consumers. The challenge for policymakers is to balance short-term support with measures that improve resilience and competitiveness over the medium term.
Policy prescription: selective restructuring and support
Javorcik recommended a pragmatic approach that allows non-viable firms to exit while targeting support at strategically important sectors and technologies. She argued that indiscriminate rescue measures would lock in inefficiencies and hinder the broader green transition.
Targeted interventions, such as temporary relief tied to restructuring plans or investment in energy efficiency and electrification, can protect jobs while accelerating necessary modernization. The emphasis is on designing measures that encourage adaptation rather than perpetuate dependence on high-cost inputs.
Market responses and energy diversification efforts
Energy markets are responding with renewed interest in diversified supply chains and accelerated renewable deployment. Utilities and industrial buyers are increasingly looking toward long-term contracts, storage solutions, and domestic generation to reduce exposure to spot-market volatility.
Investment in LNG terminals, interconnectors and hydrogen-ready infrastructure is being reprioritized in some capitals to improve supply flexibility. At the same time, the transition to cleaner energy sources remains a central strategy to insulate economies from fossil fuel price cycles over the long run.
Financial institutions and fiscal planning under stress
Higher energy prices place added strain on public finances through elevated inflation, larger energy bill subsidies and weaker growth prospects. Multilateral lenders and central banks face a tighter policy trade-off between supporting recovery and containing inflationary risks.
Javorcik’s warning implies that fiscal plans should incorporate scenarios of prolonged price pressure and allow space for targeted investments in resilience. Strengthening buffer mechanisms and reforming energy taxation can also help governments manage revenue volatility while protecting vulnerable households.
European economies are at a crossroads as geopolitical shocks collide with the transition away from fossil fuels. Javorcik’s assessment that energy prices will remain elevated should prompt immediate policy reassessment, with a dual focus on targeted support and accelerated structural change.
A measured mix of market-based adaptation, selective public support and faster deployment of low-carbon infrastructure will be crucial to limit the economic fallout and improve long-term energy security.
