The eurozone economy in the first three months of 2026’, according to the final forecast published Friday by AB’'s statistical office Eurostat %It's narrowed to 0.2.
The number is indicated in previous flash readings. %From 0.1’ expansion to a sharp deterioration and recorded in the last quarter of 2025’ %0.2’ indicates a reversal of growth.
Compared to the same period last year, the eurozone economy grew by only 0.3 percent, up from 1.2 ’ percent last year; This is a slowdown reflecting the growing pressure of the Iran war, which continues to cause significant damage to Europe’'s energy supply, business and consumer confidence.
Ireland distorts the picture but doesn't explain everything
The most notable figure in the Eurostat statement is Ireland, compared to ’'s previous quarter. .1 contraction and compared to the same period of the previous year .8’ declining.
These figures could be disastrous for most economies, but Ireland's ’'s GDP is well known to be greatly skewed by the activities of large multinational companies, especially in the pharmaceutical sector.
The Central Statistical Office of Ireland has previously noted that such fluctuations are driven by the multinational-dominated industrial sector rather than local economic conditions, and economists routinely warn against reading Ireland’'s headline GDP figures as they appear.
The fall in the first quarter largely reflects the extraordinary increase in previous quarters, when pharmaceutical exporters appeared to be making front-load shipments to the U.S. ’ ahead of tariff deadlines, inflating Irish production and thus figures across the euro zone.
The eurozone's performance, with the exception of Ireland, seems less worrying.
Germany, the bloc's largest economy, in the first quarter after two years of chronic low performance %It grew by 0.3. Italy grew by 0.3 per cent, while Spain remained the leader of major economies, growing by 0.6 per cent.
Only in France %It contracted by 0.1 percent, contributing to the weakness that preceded the current energy crisis.
According to Eurostat’'s analysis, the biggest obstacle to growth came from net trade, which reduced economic output by 0.3 percentage points, while weak investments reduced growth by another 0.1 percentage points.
Impact of the Iran war on European energy markets
The Iran war, which broke out in ’ in February 2026 following the US-Israeli joint attacks in the region, plays a central role in the weakening trajectory of the eurozone.
According to the European Central Bank, ’'s own Economic Bulletin, oil prices rose to about $104 per barrel immediately after the strikes. IranPrices after ’'s retaliation suggest global oil supply is about The Strait of Hormuz, which provided ’sini, remained close to these levels due to the blockade of ’.
Attacks on production infrastructure in the Gulf ’, including facilities in Qatar’, have also disrupted the flow of liquefied natural gas, to which European importers are heavily dependent.
Many economists have repeatedly warned that the combination of disruption in Hormuz’, US tariff pressure and China’'s export competition is hurting European economies, and that the risk of stagflation, a combination of stagnant growth and rising prices, has become the bloc's core risk scenario.
ECB faces decisive election at June meeting
Eurozone consumer prices inflation February’ %1,9’ to Mart’ta %2.5’e rose and was largely influenced by energy costs in April’ %3’e has arrived.
At its April meeting, the ECB signaled that it was closely monitoring inflationary pressures while keeping interest rates stable.
According to the probability trackers implied by the market, with the next policy decision scheduled for June 11, ’, the markets are now seeing an interest rate increase of about 25 basis points. %Priced at 2.25’e.
The Bloomberg economists survey, published in May, pointed to two increases in June and September this year. The new GDP contraction data complicates this outlook.
On the employment front, the number of workers in the Eurozone’ in the first quarter %Increased by 0.1, but working hours %It's down 0.2.
Unemployment in March %From 6.2 in April %6.3’e increased; This small but meaningful move is consistent with a market that is beginning to come under pressure despite the softening and resilience of labor demand.
