Iran War's Sixth Month Brings Unexpected Stability to Europe

The Iran War has entered its sixth month, and Europe is surprisingly faring better than expected. Despite initial concerns about stagflation, growth has held up, and inflation hasn't taken off as predicted.

In July 2022, energy contributed four percentage points to eurozone inflation, but today it adds less than a quarter of that amount. This relative stability is likely due in part to the milder nature of this crisis compared to the Ukraine invasion four years ago.

Federal Reserve Chairman Kevin Warsh has signaled that the central bank may not be done fighting inflation. He believes financing conditions are still favorable and that better price readings recently don't necessarily mean underlying trends have improved.