Nordic Outlook Euro Area

The war in Iran has triggered a new energy shock for the Euro area, leading to downward revisions in growth and upward revisions in inflation. However, the impact is expected to be more moderate than in 2022 due to structural economic improvements.

Key Takeaways

• 1.War in Iran creates an energy shock, prompting a downgrade in 2026 GDP growth to 0.7% from 1.2%.
• 2.Inflation is expected to average 3.0% in 2026 due to higher energy costs but is limited by a weaker labor market reducing second-round effects.
• 3.The ECB is expected to hike rates twice in 2026 before cutting them back to 2.0% by mid-2027.

Table of Contents

• Lower growth and higher inflation
• Disclosures
• Analyst certification
• Regulation
• Conflicts of interest
• Financial models and/or methodology used in this research report
• Risk warning
• Expected updates
• Date of first publication
• General disclaimer
• Disclaimer related to distribution in the United Kingdom
• Disclaimer related to distribution in the European Economic Area
• Disclaimer related to distribution in the United States

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