Summary

• Troubles are coming to the European economy, including an Iranian-induced oil and food price shock, a 25 percent US import tariff on European automobiles, a slowing world economy, higher interest rates, and the threatened removal of the US security blanket over Europe.
• These troubles could precipitate a European economic recession, cause serious debt problems in some of Europe’s largest economies, and put an end to any hope of the euro seriously competing with the dollar as the world’s dominant international reserve currency anytime soon.
• Even before the Strait of Hormuz’s closure, the European economy was not in good shape. After growing by a little over one percent in 2025, Europe’s GDP growth slowed to a snail’s pace of 0.1 percent in the first quarter of this year, while in April, its Purchasing Managers' Index moved into recession territory.

Troubles are coming to the European economy not as single spies but in battalions. Those troubles include an Iranian-induced oil and food price shock, a 25 percent US import tariff on European automobiles, a slowing world economy, higher

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