(July 13): Growth in the euro zone is set to be weaker this year than previously predicted after hostilities in the Middle East resumed, economists say. 

Analysts cut their 2026 forecasts to 0.5% in a Bloomberg poll conducted July 3 to 8, according to the median of 56 estimates. That’s lower than the 0.7% anticipated last month and the 0.8% projection in the European Central Bank’s baseline.

US President Donald Trump declared on Friday that the ceasefire with Iran is over, though he added that peace talks are set to continue. Fresh hostilities that have snarled up the Strait of Hormuz have eroded optimism among economists and ECB officials that energy shipments would recover.

Governing Council member Yannis Stournaras said on Friday that renewed fighting had taken the ECB “back to square one". 

Economists also cut their growth outlook for 2028, while keeping a projection for next year unchanged. Their median inflation forecast of 2.8% this year is slightly lower than last month after a sharp drop in oil prices that has since partly reversed, though it remains far above the ECB’s 2% target.

Respondents expect policymakers to raise interest rates again in September, adding to June’s quarter-point hike. They anticipate the first rate cut one year later, in September 2027.

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