The unexpected slowdown of economic growth in the Eurozone, coupled with worsening tensions in Iran, is exacerbating the risk of stagflation.

In early 2026, the Eurozone economy unexpectedly slowed down due to the surge in energy costs triggered by the conflict in Iran, leading to the risk of stagflation in the coming months. The GDP grew by 0.1% quarter-on-quarter in the first quarter, below the expected 0.2%. Among the major economies, Spain once again led the way with a growth of 0.6%, while Germany grew by 0.3%, and France unexpectedly stagnated. Since the data only covers the first month after the outbreak of the Middle Eastern conflict, it has not yet fully reflected the slowdown impact brought by the conflict spreading gradually in the Eurozone. Just hours before the European Central Bank is set to announce its interest rate decision, another set of data from Eurostat shows that risks are still accumulating: consumer prices rose by 3% in April, the fastest pace since September 2023.