Extreme heat and Iran war strain Europe's economy as wildfires spread

Aug 13, 2026

Europe's economy faces a severe double blow as record-breaking heatwaves and the US-Israel-Iran war collide. Extreme temperatures and historic droughts have triggered devastating wildfires, forced nuclear reactor shutdowns in France and Romania, and depleted the Rhine and Danube rivers, threatening to cost the EU €180 billion. Simultaneously, military disruptions in the Strait of Hormuz have choked off LNG supplies, doubling European natural gas prices to €61 per megawatt-hour and threatening to drag UK GDP growth down to 0.3% by 2027.

European heatwave economic impact

▪An exceptionally hot summer could cost the European economy €180 billion ($208 billion) in 2026, equivalent to roughly 1% of the European Union's GDP, according to estimates by Triodos Bank.
▪Low water levels in the Rhine river could reduce Germany's GDP growth by 0.3 percentage points in 2026, according to estimates by ING economists.
▪The German chemicals company BASF warned that low water levels in the Rhine river have restricted the supply of key raw materials, potentially preventing the company from fulfilling some orders.

Nuclear reactor shutdowns

▪Romania's state-owned nuclear energy producer Nuclearelectrica disconnected its only operating reactor from the power grid on August 13, 2026, due to record-low water levels in the Danube river.
▪France shut down six nuclear reactors in August 2026 due to extreme heat, drought, and a mass of jellyfish washing up outside a power plant on the English Channel coast.
▪Romania declared a state of energy emergency throughout August 2026, urging companies and households to voluntarily reduce electricity consumption.
▪High temperatures and water shortages forced nuclear power generation cuts in France and Hungary during the August 2026 heatwave.

Drought conditions

▪July 2026 was the driest July in England and Wales since records began in 1836, according to the Met Office.
▪Low water levels in the Danube river exposed World War II German warship wrecks in Serbia and ancient mammoth remains in northern Bulgaria in August 2026.
▪The Danube river's discharge fell to approximately 692 cubic meters per second in August 2026, compared to its seasonal average of around 1,900 cubic meters per second.

Wildfire damage

▪A wildfire near the coastal town of Omis, Croatia, killed one person, hospitalized 14 people, and forced more than 1,000 people to evacuate on August 13, 2026.
▪Spanish authorities transferred the remains of three 11th-century kings from the San Juan de la Peña monastery on August 13, 2026, to protect them from an active wildfire.
▪An estimated 12,500 people died from heat-related causes in Germany between January 1 and August 2, 2026, according to the Robert Koch Institute.
▪A wildfire in the West Midlands region of England destroyed approximately 20 to 30 homes in the town of Stourbridge on August 13, 2026.

Iran war energy pressures

▪The ongoing war between the United States, Israel, and Iran has restricted commercial traffic through the Strait of Hormuz, which historically carried 20% of the global liquefied natural gas supply.
▪The benchmark European natural gas contract closed at €61 per megawatt-hour on August 12, 2026, compared to €32 on the same day in 2025.
▪European Union natural gas storage facilities were 59% full on August 11, 2026, which is below the seasonal average and on par with levels from summer 2021.

UK economic resilience

▪Internal UK Treasury modeling suggests that United Kingdom GDP growth could slow to 0.3% in 2027 if disruption in the Strait of Hormuz continues through 2026.
▪United Kingdom business investment increased by 1.7% in the second quarter of 2026, defying economist forecasts for a 0.5% decline.
▪United Kingdom gross domestic product rose by 0.4% in the second quarter of 2026, following a 0.6% expansion in the first quarter.