ECB Forecasters Slash Eurozone Growth to 1.0% and Raise Inflation to 2.7% in 2026 as Middle East War Hits Hard

The European Central Bank's Survey of Professional Forecasters for the second quarter of 2026 sharply revised the eurozone outlook, driven by the Middle East war's energy price shock. Headline inflation expectations jumped to 2.7% for 2026, up from 1.8% in the previous survey, before falling to 2.1% in 2027 and 2.0% in 2028. Core inflation was revised up 0.2 percentage points to 2.2% for both 2026 and 2027. Longer-term inflation expectations held steady at 2.0% for 2030, unchanged for the tenth consecutive survey round. GDP growth was cut to 1.0% for 2026, down 0.2 percentage points, and to 1.3% for 2027. The unemployment rate held at 6.3% for 2026. Oil prices were expected to hit USD 94 per barrel in the second quarter of 2026. Wage growth was revised up to 3.3% for 2026. Forecasters assigned roughly 50% probability to their baseline, 25% to an adverse scenario, and 10% to a severe scenario.