The situation in Ukraine could do more damage to Europe's economy than the novel coronavirus pandemic, according to the boss of the continent's largest automaker.

Herbert Diess, chief executive of Germany's Volkswagen－the maker of brands including Audi, Porsche, Lamborghini, and Bentley－told the Financial Times newspaper a prolonged conflict would be "very much worse" for the region's economy than the pandemic that triggered lockdowns and wholesale closures of factories.

The threat of the conflict for Germany and Europe is "huge", Diess said, with higher inflation one of the many likely consequences that would follow global supply chain interruptions.

Diess told the paper the situation "could lead to huge price increases" and "scarcity of energy".

"It could be very risky for the European and German economies," he said.

Diess issued the warning after many Western nations introduced sanctions against Russia, Russian companies, and Russian individuals, in an attempt to pressure President Vladimir Putin to scale back or end the "special military operation" in Ukraine.

Diess said he supports sanctions but noted dialogue will ultimately be needed to solve the crisis and get Europe's economy moving again.

VW itself has temporarily closed its two factories in Russia, where it employs 7,000 people. Other European automakers, including BMW and Mercedes, have made similar moves.

"For a society like Germany, depending on Russian energy, raw materials… if you imagine a scenario where we cut off business relations with Russia, which we probably would have to do if this conflict (continues), you could not buy energy any more, and this would lead to a situation that might impact Europe and Germany considerably," he said.

While the United States imposed a blanket ban on Russian oil and gas imports this week, the European Union has been more cautious, owing largely to the fact that Russia supplies around 45 percent of its gas and that there are few affordable alternatives.

The BBC noted on Thursday that oil prices shot up again that morning because of confusion about whether major oil producers will increase production to compensate for lost Russian oil.

The confusion followed the United Arab Emirates appearing to call for Organization of the Petroleum Exporting Countries, or OPEC, nations to increase output, before the country's energy minister then seemed to walk back from the idea.

The cost of oil rose by more than 3 percent in early trading on Thursday, following a 17 percent drop on Wednesday.

The European Central Bank, meanwhile, was set to meet on Thursday afternoon to consider how best to tackle rising inflation and slowing growth.