The latest European Central Bank Consumer Expectations Survey indicates that renewed geopolitical tensions are reinforcing fears of rising inflation and weaker economic growth among households across the euro area, with the conflict involving Iran prompting a notable deterioration in consumer sentiment.
According to survey data collected in March 2026, consumers significantly increased their inflation expectations following the outbreak of hostilities in Iran in February. Average inflation expectations rose by approximately 2.5 percentage points, while expectations for economic growth fell by around 1.2 percentage points. Median inflation expectations also increased by 1.5 percentage points over the same period.
The study, conducted by researchers including Olivier Coibion of the University of Texas and Dimitris Georgarakos of the European Central Bank, examined how households responded to the Iran conflict compared with reactions to Russia’s invasion of Ukraine in 2022. The findings suggest that consumers remain particularly sensitive to geopolitical events after experiencing the sharp inflationary pressures of recent years.
Longer-term inflation expectations also moved higher. Average expectations for inflation three years ahead increased by 0.87 percentage points in March 2026, while median forecasts rose by 0.44 percentage points. Researchers noted that these increases came on top of already elevated expectations, indicating that concerns about future price pressures had been building even before the latest geopolitical developments.
Consumer focus on inflation remained unusually high throughout the period. Almost half of respondents reported paying close attention to inflation developments in March 2026, only slightly below the levels seen in early 2023 when eurozone inflation reached 8.6%. The results suggest that the effects of the recent inflation surge continue to influence household perceptions and expectations.
The survey also highlighted the enduring impact of geopolitical uncertainty on consumer confidence. Around 35% of respondents reported being highly concerned about the effect of geopolitical risks on their personal finances in May 2022. Although this figure eased over time, approximately 25% of consumers continued to express similar concerns as recently as December 2024, with elevated anxiety levels persisting into late 2025 ahead of the Iran conflict.
Researchers found that confidence in the European Central Bank played an important role in shaping expectations. Households with greater trust in the ECB tended to adjust their inflation forecasts by a smaller margin following geopolitical shocks than those with lower levels of confidence in the institution. Survey results also indicated that trust in the central bank was stronger in early 2026 than it had been prior to the Ukraine conflict in 2022.
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