Researchers at the European Commission warned on Monday that nearly half of the EU's territory is currently at risk of drought, as southwest Europe wilted under a punishing heatwave.

In a report for July, the European Commission’s Joint Research Centre said that 46 per cent of the EU's territory was exposed to warning-level drought, with 11 per cent at an alert level, with crops already suffering from the lack of water.

Italy was the hardest hit, with the Po River basin in the north of the country facing the highest level possible of drought severity, the EU said.

In Spain, water reservoir volumes are currently 31 per cent lower than the 10-year average, the report said, while in Portugal, water to produce hydroelectric energy is at half the average of the previous seven years. 

The EU researchers also warned that the lack of water and strong heat are driving crop yields lower in France, Romania, Spain, Portugal and Italy.

Weather forecasts predict more of the same, the report said, adding to an already "very critical situation" that will exacerbate the effects on agriculture, energy and water supply.