WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

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By Mario Holzner

Crisis spillover: How the Middle East war tests CESEE’s limits

The war in Iran, launched by Israel and the US on 28 February 2026, has evolved from a Middle Eastern conflict into a multi-dimensional shock that is reshaping the security, energy and economic landscape of Central, East and Southeast Europe (CESEE). Even as the main fighting remains distant, it tests the region’s resilience, cohesion and strategic autonomy, amid overlapping crises like the war in Ukraine.

Strikes on production facilities in the Persian Gulf and the near-closure of the Strait of Hormuz have driven global oil and gas prices sharply higher. In CESEE, where fiscal and corporate budgets are still recovering from previous energy price shocks, this fuels inflation, widens current account deficits and erodes the momentum behind the green transition (since, with government budgets having to address the high energy costs, green investments are being postponed). Governments face a stark trade-off between immediate affordability and long-term climate and energy security goals.

Iranian missiles and drones have reached the Eastern Mediterranean, striking NATO-linked sites like Britain’s Cyprus military bases and Turkish territory. This brings European soil within range of Iran, especially NATO’s southern flank. Black Sea and Balkan states – Turkey, Greece, Bulgaria, Romania and Cyprus – face a dual risk: direct spillover plus pressure to shore up the deterrent effect of the alliance amid the ongoing Ukraine war, often without guaranteed burden-sharing.

The conflict risks new migration pressures. No mass exodus from the zone of conflict has yet hit the EU, but Balkan-route states must prepare for future migration flows. This would intensify demographic strains and social tension, and would overload the asylum system, embedding Middle Eastern conflicts in Europe’s domestic security framework.

The military campaign by Washington and Israel against Iran has marginalised the EU by demoting the bloc from a major player at the nuclear negotiating table1 to the role of bystander, and has exposed its internal rifts. Eastern EU members balance security reflex actions against energy vulnerabilities and the fear of conflict escalation destabilising the wider Black Sea and Balkans region. CESEE finds itself squeezed between US-led disorder, a revisionist Russia and a rising China, with scant leverage available. The Gulf–Eastern Mediterranean–Black Sea corridor is now subject to higher insurance costs, delays and risks.

CESEE’s hydrocarbon dependence: persistent vulnerabilities and uneven progress

Among the few measures available to oil- and gas-importing economies to partially shield themselves from the fallout of the Iran war and other conflicts in hydrocarbon-exporting regions is a determined reduction in their dependence on imports of mineral products. Yet the CESEE economies continue to exhibit a fairly strong reliance on the import of mineral products.2 Examination of the period 2006-2025 reveals the following picture. The trade deficit in mineral products averaged around 5% of GDP across 20 of the CESEE countries (the exceptions being Russia, Belarus and Kazakhstan), indicating substantial net imports, particularly of mineral fuels. Moldova stands out as having the greatest dependence, at roughly 11% of GDP, followed by Kosovo (about 8%), and then Ukraine, North Macedonia and Bulgaria (around 7%). At the other end of the spectrum, Estonia, Albania and Romania have comparatively low exposure of about 2% of GDP.

At the same time, most countries of the region made notable progress over the period 2006-2025 in reducing their dependence on the import of mineral products in real terms (i.e. once changes in the price of oil are stripped out). Excluding outliers, the median average dependence-reduction effort was in the order of -4 percentage points (pp) of GDP, with strong performances from Slovenia (around -8pp), and Moldova, Romania, Serbia and Ukraine (about -7pp). Weaker performers like Croatia (roughly -0.2pp) and Hungary (about -1.1pp) show only limited improvement.

High-dependence economies such as Moldova, Ukraine and Bulgaria frequently combine pronounced vulnerability with ambitious reduction efforts (-6pp to -7pp of GDP), suggesting deliberate diversification strategies in the wake of recent energy crises. EU members like Poland, Czechia and Slovakia display moderate average dependence (3-5% of GDP) coupled with a solid reduction (-4pp to -5pp), reflecting both market integration and regulatory pressure, whereas non-EU Balkan countries show a much more heterogeneous pattern. Overall, the region has reduced its import dependence in real terms faster than oil prices have risen, bringing average dependence down to roughly 3% of GDP by 2024-2025.

However, continued elevated dependence in countries such as Moldova and Kosovo (8% of GDP) reveals highly uneven resilience, just as the Iran war adds another major external shock.

Footnotes:

1 The UK, France and Germany played an important role in negotiating the Joint Comprehensive Plan of Action (JCPOA) agreement signed back in 2015, whereby Iran agreed to scale down its nuclear programme in return for an easing of sanctions.

2 Mineral products include first and foremost mineral fuels and oils and their derivatives, as well as other oil-price-sensitive and energy-intensive mineral products.