BRUSSELS, May 21 -- The European Union (EU) economy is expected to grow at a slower pace with higher inflation, and the positive trend in labor markets is set to halt amid the energy shock triggered by the Middle East conflict, the European Commission's spring forecast said on Thursday.

EU's gross domestic product (GDP) growth is projected to slow to 1.1 percent in 2026, a downward revision of 0.3 percentage points from the last year's autumn forecast, before edging up to 1.4 percent in 2027. In the eurozone, growth is forecast at 0.9 percent this year and 1.2 percent next year.

Inflation in the EU is expected to reach 3.1 percent in 2026 -- a full percentage point higher than previously forecast -- before easing to 2.4 percent in 2027....