The euro-area economy is proving more resilient to this year’s energy shock than policymakers initially expected as lower dependence on fossil fuels, government support and artificial-intelligence investment cushion the impact of higher energy prices.
European Central Bank economists said structural changes in Europe’s energy system have significantly reduced the economy’s vulnerability compared with previous energy crises.
The euro area has substantially reduced its dependence on oil over recent decades, while increased renewable and nuclear generation has improved its ability to absorb disruptions in global fossil-fuel markets.
Those changes matter because the latest global energy shock has pushed oil and gas prices sharply higher, reviving inflation concerns and increasing pressure across financial markets.
Yet the euro-area economy has continued expanding.
Excluding volatile Irish data, real GDP during the second quarter stood 0.6% above its level in the fourth quarter of 2025. Growth excluding Ireland has remained around 0.3% during each of the past four quarters, according to the ECB analysis.
The ECB identified artificial-intelligence-related investment and stronger global demand as additional sources of support.
Fiscal policy has also helped cushion the economy, while resilient labor markets have prevented the energy shock from developing into a broader contraction.
The resilience does not eliminate Europe’s risks.
ECB economists warned that several sources of support could prove temporary. AI investment could slow, fiscal support could fade and another geopolitical escalation could disrupt energy supplies.
For investors, Europe’s changing sensitivity to energy prices is increasingly important.
Higher oil and gas prices remain damaging, but the economic transmission mechanism is no longer identical to previous European energy crises.
The next test will be whether growth remains resilient if energy costs stay elevated while monetary conditions remain restrictive.
