Europe will spiral into a severe recession as the energy crisis hikes inflation and weighs on GDP, BlackRock says

Europe will spiral into a severe recession, as the shortage of energy supplies is set to spike inflation even higher and weigh heavily on Europe's GDP, according to a note.

We have argued that the energy crunch will cause a recession in Europe. Analysts warned that the crisis has worsened since then as Russia has stopped gas supplies.

The European Central Bank raised its rate by 75 points last week in order to control inflation in the Eurozone.

Europe's economic activity is under pressure because of the energy crisis. The EU's energy spending is more than double that of the US.

The European Central Bank is not acknowledging how it will crush activity further by trying to fight high inflation. "We think the European Central Bank will wake up to this sooner than markets think, but not before it faces a severe recession."

According to analysts, the ECB's downside scenario of a 0.9% contraction in the economy is looking more likely, which means European stocks haven't fully priced in.

The worst of the energy crisis is expected to hit Europe this winter as heating demand will put more pressure on the supply shortage and send prices higher.

Although the EU has built up gas reserves to more than 80% of capacity, the 27 country bloc is still struggling to ration supplies ahead of winter, and some European nations have never relied on reserves alone through the winter.