Middle East War Tightens Credit Squeeze on Belgian Businesses

Nearly three months after the outbreak of war in the Middle East, the economic fallout is hitting Belgium hard. Businesses across the country are finding it increasingly difficult to secure loans as credit conditions tighten, inflation surges, and growth forecasts are revised downward. According to a new analysis by La Libre Belgique, the conflict that began on February 28 with Israeli-American strikes against Iran is now having tangible and escalating effects on the Belgian economy.

A Perfect Storm for Borrowers

The credit insurance specialist Coface reports that borrowing conditions are tightening significantly across the Belgian economy. “Our mission is to keep the world open, to facilitate commercial exchanges,” said Alexandre Lacreu, CEO of Coface Belgium & Luxembourg. “It’s very important to maintain business in these difficult times.” Even if the Strait of Hormuz were to reopen tomorrow, Coface experts caution, the crisis would not end overnight — the economic disruption has deeper structural effects.

Belgium is described as one of the countries most exposed to this crisis. Its large chemical and petrochemical sector, centered on the Antwerp port, is highly energy-intensive and dependent on imported raw materials. The chemical industry is identified as particularly vulnerable to the dual shock of rising energy costs and tightening credit.

Inflation Surges, Growth Stalls

Belgian inflation jumped to 4% in April 2026, driven by surging fuel, gas, and electricity prices. In an analysis published on May 19, ING Belgium warned that inflation could “largely exceed 4%” in the coming months. Charlotte de Montpellier, Senior Economist at ING Belgium, described the situation as “the combination of an energy shock, sluggish domestic demand, rising borrowing costs, and geopolitical uncertainties” weighing heavily on the region’s dynamics.

ING has revised its Belgian GDP growth forecast for 2026 downward from 0.9% to 0.7%, directly attributing the downgrade to the energy shock stemming from the conflict.

SMEs on the Brink

The pain is being felt most acutely by small and medium-sized enterprises. According to the Union des Classes Moyennes (UCM), 33% of Belgian SMEs now report being “vulnerable” — meaning their future is at risk if prices continue to rise. A further 8% say they are close to bankruptcy. “33% of our companies are vulnerable,” said Pierre-Frédéric Nyst, President of UCM, in an interview with RTBF/Matin Première. “Vulnerable means that if prices continue to increase, the future of the company is at risk.”

Food Industry Under Pressure

The food sector is also feeling the strain. A survey by Fevia, the Belgian food industry federation, found that 98% of food companies report being affected by the war. According to RTBF/Fevia, 93% face rising production costs, while 69% have not yet passed these costs on to consumers, squeezing margins severely. “These are first-round effects,” warned Carole Dembour, an economist at Fevia. “We will certainly have a second-round effect via the increase in the price of agricultural raw materials, like fertilizers. This will inevitably be felt throughout the chain.”

Interest Rates Rising

Bond yields in Belgium have risen approximately 0.40% since the conflict began, according to Bernard Keppenne, Chief Economist at CBC Bank. In an interview with RTBF, Keppenne explained: “It’s a rise across the entire yield curve, both the short-term 2-year rate and the 10-year or 30-year rate.” Mortgage rates have already increased by 20-30 basis points, and the European Central Bank is expected to raise its benchmark rate in June 2026, further increasing borrowing costs for businesses and households.

Government Response

The Belgian federal government — the Arizona coalition led by Prime Minister Bart De Wever — approved €80 million in emergency energy aid over three months, announced on April 22. According to RTBF, the measures include increased commuting allowances for workers and expanded social energy funds for vulnerable households. However, the package is relatively modest, and the government has limited fiscal space for further intervention given Belgium’s high public debt.

What Lies Ahead

The trajectory of the conflict — and specifically the status of the Strait of Hormuz, through which 20-25% of the world’s oil passes — will be the determining factor in whether Belgium faces a mild slowdown or a more severe economic contraction. Even a partial reopening would significantly ease energy prices, but as Coface experts warn, the structural damage to credit markets and business confidence will take far longer to repair.

With the ECB poised to raise rates, wage indexation set to feed through to higher labor costs by January 2027, and business investment likely to be postponed amid uncertainty, Belgian companies face a challenging road ahead. The combination of rising costs, tighter credit, and limited government capacity creates an environment where resilience will be tested across every sector of the economy.