Eurozone Investor Morale Higher Than Expected

The ZEW Indicator of Economic Sentiment for the Euro Area climbed by 18.6 points from the prior month to 9.5 in June 2026, way better than market forecasts of -7.2. The improvement was underpinned by hopes of a resolution to the Middle East conflict, which should alleviate pressure on energy prices and inflation. In June, 57.7% of analysts expected no change in economic activity, while 25.9% anticipated improvement and 16.4% expected deterioration. The index measuring inflation expectations declined by 19.5 points to 45.8. Meanwhile, the assessment of the current situation was less favorable, with the index falling by 2 points to -43.4.

The ZEW Indicator of Economic Sentiment for the Euro Area rose by 11.3 points to -9.1 in May 2026, beating market expectations of -20. The uptick suggests sentiment is improving, as markets continue to price in hopes of a quick resolution to the Iran conflict. In May, 51.1% of analysts expected no change in economic activity, while 29% anticipated a deterioration and 19.9% expected improvement. The assessment of the current situation also improved, with the index rising 1.6 points to -41.4, while inflation expectations dropped 13.7 points to 65.3.

The ZEW Indicator of Economic Sentiment for the Euro Area dropped sharply by 11.9 points to -20.4 in April 2026, its lowest level since December 2022 and well below expectations of -3.6. The decline reflects growing concern over the escalating conflict in the Middle East, which is increasingly seen as a risk to energy prices and supply chains across Europe, raising fears of longer-term energy shortages for businesses. In April, 44% of analysts expected no change in economic activity, while 38.2% anticipated a deterioration and 17.8% expected improvement. The assessment of the current situation also weakened, with the index falling 13.1 points to -43, while inflation expectations remained broadly unchanged at 79.