Eurozone Investor Morale Higher Than Expected

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.

The ZEW Indicator of Economic Sentiment for the Euro Area fell sharply by 47.9 points from the previous month to -8.5 in March 2026, the lowest in 11 months and significantly below market expectations of 24. Sentiment was heavily weighed down by the escalating conflict in the Middle East, which continues to threaten prices and supply chains across Europe. In March, 44.1% of surveyed analysts expected no change in economic activity, while 32.2% anticipated a deterioration and 23.7% foresaw an improvement. Meanwhile, the indicator of the current economic situation declined by 16.3 points to -29.9, and inflation expectations surged by 78.9 points to 79.