European pharmaceutical production to fall 2.7% in 2026 due to Middle East conflict

A credit‑insurance firm forecasts that Western European pharmaceutical output will contract by 2.7% in 2026, reversing a 14.6% surge recorded in 2025. The decline is linked to higher energy prices, supply‑chain interruptions and increased transport costs triggered by the conflict in the Middle East, notably the blockage of the Strait of Hormuz.

Manufacturers of generic medicines and contract development and manufacturing organisations (CDMOs) are expected to feel the greatest financial pressure because they operate energy‑intensive facilities and have limited ability to pass cost hikes to consumers under European price‑regulation rules. Larger multinational pharma companies are better positioned to absorb the higher expenses thanks to diversified product portfolios and stronger pricing power.

Despite these challenges, the sector retains solid access to external financing, a crucial factor given the high R&D costs. Analysts also warn of additional headwinds, including a wave of patent expirations through 2030 and possible tightening of health‑care spending that could limit price flexibility. The report notes that artificial‑intelligence tools are likely to boost productivity in pre‑clinical research and certain production stages over the coming years.