Eurozone Economy Resilient Despite Middle East War

The eurozone economy showed resilience in the second quarter of 2026, beating expectations despite the energy shock from the Middle East war. According to data published by Eurostat on Thursday, the 21-country bloc grew by 0.4 percent in Q2, surpassing forecasts for a 0.2 percent increase.

The statistics agency's revised data also showed zero growth in the first three months of 2026, compared to an initial estimate of a 0.2 percent contraction. This second revision is significant because it eliminates the specter of a technical recession, which occurs when there are two consecutive quarters of economic decline.

Capital Economics' chief Europe economist Andrew Kenningham attributed the eurozone's steady growth to households and businesses not significantly cutting back on spending due to the Iran war. 'The continued steady growth of the eurozone economy... shows that households and businesses have not pared back their spending much due to the Iran war,' he said.

Ireland was a notable contributor to the eurozone's growth, with its economy expanding by 3.9 percent in Q2, up from a 7.0 percent contraction in the first quarter. However, this is largely attributed to accounting operations by multinationals rather than underlying economic activity.

When excluding Ireland, Capital Economics estimated that the eurozone's growth would be around 0.25 percent. The largest European economies - Germany, France, and Italy - also recorded GDP growth, although Germany's expansion slowed to 0.2 percent in Q2 after a 0.4 percent increase in the first quarter.