How could the Iran war create a "double scar" for eurozone consumers and firms according to recent ECB research, and what are the key findings on inflation expectations, financial stability risks, and the broader economic outlook?

According to ECB research published on May 29, 2026, the Iran war risks creating a "double scar" for the eurozone because consumers already scarred by the Ukraine war are now reacting faster and more sharply to the new conflict, amplifying the economic damage . This means the same-sized shock can produce a deeper and quicker deterioration in spending, confidence, and inflation expectations than it would have without the prior scarring.

Key findings

Consumer "double scar" mechanism

• Eurozone consumers who experienced the Ukraine war have become more sensitive to geopolitical shocks. When the Iran war hit, their inflation and growth expectations shifted more rapidly than after the first shock, meaning the economic hit could be deeper and faster .
• Repeated geopolitical shocks reinforce fears about stagflation, with short-term expectations being especially sensitive .

Inflation expectations

• The war has caused a material near-term increase in inflation, primarily through higher energy prices . HICP inflation is projected to spike to 3.1% in Q2 2026 before easing to 2.8% in Q3 .