European Central Bank survey shows firms raising cost and inflation expectations amid US-Iran war

Energy-intensive sectors are already hiking prices by double digits as the ECB revises its 2026 inflation forecast upward and cuts GDP growth projections.

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Add us on Google by Editorial Team May. 26, 2026

Euro area companies are bracing for a painful stretch. The European Central Bank’s latest quarterly survey of large firms, released May 4, found that businesses across the eurozone have sharply raised their expectations for input costs, selling prices, and near-term inflation, all driven by the same catalyst: the US-Iran war that erupted in late February.

The numbers tell a clear story. Firms now expect to raise selling prices by 3.5%, up from 2.9% in the prior survey. ECB staff have revised their headline inflation projection for 2026 to 2.6%, with Q2 expectations spiking to 3.1%. Meanwhile, GDP growth for the euro area has been slashed to 0.9%.

Energy-intensive sectors are getting hit hardest

The pain isn’t distributed evenly. Industries that burn through energy, think air travel, logistics, and chemicals, are reporting price increases that often exceed double digits. Oil price surges since February have ripped through supply chains in these sectors.

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Companies surveyed by the ECB warned that if the Middle East conflict drags on for months, the eurozone could face an inflation surge similar to what happened in 2022-23. That episode, triggered by Russia’s invasion of Ukraine, saw energy costs spike and consumer prices spiral across the continent. The 2022-23 inflation wave forced the ECB into its most aggressive rate-hiking cycle in its history.

The ECB’s balancing act just got harder

One piece of relatively good news buried in the data: longer-term inflation expectations remain anchored. The 5-year forward measure sits at roughly 2%, right in line with the ECB’s target.

The ECB is caught between two forces pulling in opposite directions. Inflation is running hotter than expected, which normally calls for tighter monetary policy. Growth is weakening, which normally calls for looser policy. Policymakers have expressed readiness to take decisive action should signs of second-round effects through wages or core prices emerge.

What this means for investors and crypto markets

Rising inflation expectations in the eurozone create pressure on the ECB on interest rates. If the central bank holds rates higher for longer, or even raises them again, that tightens financial conditions across Europe. Risk assets, including crypto, tend to struggle in tight-money environments because the opportunity cost of holding non-yielding assets goes up.

The 2022-23 inflation episode offers a useful case study. During that period, Bitcoin initially sold off alongside other risk assets as central banks tightened. But as the narrative shifted toward persistent inflation and currency debasement concerns, crypto saw renewed institutional interest as a portfolio diversifier.

The GDP growth cut to 0.9% also deserves attention. A eurozone flirting with stagnation while inflation climbs is the exact macro backdrop that tends to erode confidence in traditional financial systems.

Investors should watch two things closely over the next quarter: whether Q3 inflation prints confirm the Q2 spike to 3.1%, and whether the ECB signals a policy pivot in either direction at its next governing council meeting.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.