Europe's Economy Remains Strained by Iran War Spillovers

Fitch Ratings has released a report warning that macroeconomic conditions in developed Europe will remain strained due to spillovers from the Iran war, even if the Strait of Hormuz reopens quickly.

The report highlights that 13 outlooks in Europe had weakened since the end of 2025, including the outlook for western European sovereigns, which shifted to deteriorating from neutral.

Fitch's baseline assumptions for macroeconomic conditions covering 2026 and 2027 have deteriorated during the first half of 2026, largely because of spillovers from the energy price shock caused by the US-Iran war in the second quarter of 2026.