European Businesses Adjust Expectations Following US-Iran War

The recent US-Iran war has had far-reaching consequences for European businesses, according to the latest survey by the European Central Bank (ECB). The ECB's Survey on the Access to Finance of Enterprises, known as SAFE, was conducted from February 19 to April 1 and provides valuable insights into how firms are adjusting their expectations in response to the conflict.

Before the war broke out on February 28, companies expected to raise their selling prices by 2.9% over the next 12 months. However, after the conflict began, this figure jumped to 3.5%, indicating a sharp upward revision in short-term inflation and cost expectations.

The median expectation among surveyed firms for one-year inflation also rose from 2.5% before the war to 3.0% afterward, suggesting that companies are factoring in higher costs due to the conflict. Energy-heavy sectors reported the most pessimistic readings across nearly every category, with negative outlooks for turnover, investment, and loan availability from banks.

The ECB now projects 2026 headline inflation at 2.6%, with a Q2 spike expected to hit 3.1%. This could lead to tighter financial conditions, reducing appetite for speculative assets like crypto. The stability of longer-term inflation expectations is also worth watching closely, as rising three-year and five-year expectations would signal that firms are beginning to view the inflationary impact as structural rather than transitory.