Economy

Prime Minister Rob Jetten has warned that the continuation of the war in Iran could worsen the Netherlands' economic outlook, making domestic purchasing power heavily dependent on whether the conflict ends. With the central bank predicting that the war will push the Dutch budget deficit to an unacceptable 3.3 per cent this year, breaching the EU's 3 per cent limit, Jetten noted that the government could raise taxes, cut spending, or delay investments to balance the books. However, the Cabinet will wait for updated financial figures in August before deciding on any emergency measures as they finalise the 2027 budget for its official presentation in September.

The Amsterdam stock market hit a new record high on Friday as shares rose across Europe, driven by hopes for peace in the Middle East and major business news. Investor confidence surged after US President Donald Trump cancelled planned attacks on Iran and hinted at a weekend peace deal, while markets also rallied ahead of the historic stock market debut of Elon Musk's SpaceX. As the threat of a wider war eased, oil prices fell below 90 dollars a barrel, which dragged down oil giant Shell by 2 per cent but sent airline Air France-KLM soaring by 6 per cent due to cheaper fuel. Meanwhile, digital payment firm Adyen led the day's corporate gainers, jumping 4 per cent after announcing a 290 million euro takeover of American platform Orb.

The Dutch central bank expects the government's budget deficit to breach the European Union's 3 per cent limit this year for the first time since 2020, reaching 3.3 per cent due to a one-off €8 billion military pension reform, high healthcare spending, and slowing economic growth caused by the war in the Middle East. Although the deficit is projected to drop to 2.6 per cent next year, the central bank has urged the government to exercise strict fiscal caution to maintain a financial cushion against future global shocks. To avoid further emergency austerity measures, the bank advises the coalition government to successfully implement its current financial agreements and suggests reviewing tax discounts for homeowners and self-employed workers, while hoping ministers can resolve disputes with trade unions currently striking over proposed cuts to unemployment and disability benefits.

Ongoing conflict in the Middle East and the blockade of the Strait of Hormuz are dampening Dutch economic growth by inflating energy prices and disrupting global trade. While economists at Rabobank do not predict a full recession, they have downgraded overall growth forecasts to just 1 per cent this year and 0.8 per cent next year. Major sectors like manufacturing, construction, and transport are facing stagnation due to high fuel costs and falling investment, while inflation and tax rises squeeze consumer spending in retail and hospitality. Conversely, the technology and digital services sectors remain largely unaffected, continuing to grow strongly as businesses invest heavily in artificial intelligence and automation to boost productivity.

Dutch hospitality businesses are seeing little additional revenue during the World Cup, according to industry group KHN. Interest may rise only if the Dutch team progresses further in the tournament, though some cafés are organising activities for matches with strong local fan bases. Earlier tournaments show only modest revenue peaks, with restaurants often seeing fewer visitors during games.

Fixed energy contract rates in the Netherlands are now 13% higher than before the start of the Iran war, according to new figures from the Authority for Consumers & Markets (ACM). Variable tariffs have not yet risen, but many suppliers traditionally adjust prices on 1 July. Reduced oil and gas flows through the Strait of Hormuz have pushed up wholesale gas prices, while more Dutch households are opting for fixed‑rate contracts.

RaboResearch economists project that Dutch house price growth will stall at zero percent for the remainder of 2026 due to economic fallout from the Middle East conflict. Rising inflation is driving up mortgage interest rates, which reduces household borrowing capacity and dampens demand despite rising wages. Furthermore, grid congestion, high construction costs, and nitrogen restrictions will cause new home completions to drop sharply next year.

Inflation in the Netherlands climbed further in May, driven by higher flight costs, holiday demand, and rising energy prices. The increase keeps Dutch inflation above the eurozone average. Economists warn that ongoing geopolitical tensions could push prices up further.