In an ECB blog post based on Consumer Expectations Survey data, the authors compare households’ responses to Russia’s 2022 invasion of Ukraine and the 2026 war in Iran and find that geopolitical conflicts quickly push euro area consumers towards a more stagflationary outlook. In March 2026, one month after the outbreak of the Iran war, mean and median 12-month inflation expectations rose by about 2.5 and 1.5 percentage points, while 12-month growth expectations fell by about 1.2 percentage points. Three-year-ahead mean and median inflation expectations also increased by 0.87 and 0.44 percentage points. The post says the latest reaction was, so far, somewhat less pronounced than after the Ukraine invasion, but it began with more pessimistic growth expectations and a significant upward shift in the distribution of medium-term inflation expectations relative to early 2022. It attributes households’ sensitivity to a 'double scar' from the recent inflation surge and prolonged geopolitical tensions, noting that attention to price changes rose back to almost 50% in March 2026 after easing only to 41% in August 2025, and that concern about geopolitical risks to household finances remained elevated. The authors also say trust in the ECB helps anchor inflation expectations, with households that report higher trust revising their expectations up by less after both conflicts, while future survey rounds will show whether views rise further as more information on the Iran conflict becomes available or correct lower if conditions stabilise.
European Central Bank2026-05-29
European Central Bank blog finds repeated geopolitical shocks lifted euro area households’ inflation expectations and weakened growth expectations
The European Central Bank published a blog post using Consumer Expectations Survey data showing that the 2026 war in Iran, like Russia’s 2022 invasion of Ukraine, quickly shifted euro area households towards a more stagflationary outlook. One month after the Iran conflict began, 12‑month inflation expectations rose sharply while growth expectations fell, medium‑term inflation expectations increased from an already elevated base, and attention to price changes and concern about geopolitical risks stayed high. The authors find that higher trust in the ECB is associated with smaller upward revisions in inflation expectations and say future survey rounds will show whether expectations adjust further as the conflict evolves.