European Central Bank researchers report that the outbreak of war involving Iran has sharpened euro zone consumers' sensitivity to economic shocks, compounding behavioral changes that began after Russia's invasion of Ukraine. The ECB team, using its Consumer Expectations Survey (CES), says the combined experience may deepen and accelerate the economic impact on households.
The researchers note that Russia's February 2022 invasion of Ukraine precipitated an energy shock and a period of elevated inflation from which Europe had in large part recovered. That fragile recovery, they say, was tested again after U.S.-Israeli airstrikes on February 28 triggered a war on Iran that produced unusually severe disruption to energy supplies.
Analysts at the ECB examined whether consumers now react more strongly to the economic consequences of such geopolitical upheaval and conclude the evidence points in that direction. Using the CES, economists including Olivier Coibion observed that consumers immediately ramped up attention to price movements when the Iran conflict began, even though headline inflation at the time was near the ECB's 2% target.
Specifically, the CES showed that nearly half of respondents in March 2026 reported paying attention to price changes. The researchers highlight that this level of concern was comparable to that recorded in January 2023, when euro area inflation stood at 8.6% - a situation in which heightened price vigilance would be more plainly expected.
The ECB authors described the pattern as evidence of a potential "double scar". They cautioned that the blog post presenting these findings does not necessarily represent the institution's official stance. Still, the researchers argued that the two episodes of financial stress - the Ukraine-related energy shock and the Iran war disruption - could reinforce each other and shape consumer expectations and behavior in the months ahead as conflicts and macroeconomic uncertainty persist.
In their analysis, the economists explain that such scars - memories of financial strain - can make consumers more sensitive to new shocks. This heightened sensitivity, they caution, tends to make stagflationary scenarios - the coexistence of rising prices and falling growth - more pronounced and more persistent in consumers' beliefs. The knock-on effect, the team says, is increased macroeconomic uncertainty that could weigh on household spending decisions.
Oil markets, a key transmission channel to inflation, have already shown significant volatility. Prices spiked to well above $120 a barrel in April amid the Iran conflict, though they later eased on hopes for a peace agreement. Against this backdrop, and as the ECB seeks to steer monetary conditions in response to these risks, it is all but certain to raise interest rates at its next policy meeting, the researchers note.
Context and implications
The study highlights how sequential geopolitical shocks can leave persistent imprints on consumer psychology, with direct implications for inflation dynamics and demand. Sectors tied closely to energy - such as manufacturing, transport and household energy consumption - are particularly sensitive to these developments, while financial markets and consumer-focused retail are exposed to shifts in spending and interest-rate expectations.