The US-Iran war that kicked off on February 28, 2026, is already reshaping how European businesses think about prices, costs, and the near-term economic outlook. The European Central Bank’s latest quarterly survey of euro area firms shows a sharp upward revision in short-term inflation and cost expectations, with energy-intensive sectors bearing the brunt of the shift.

What the ECB survey actually found

The data comes from the ECB’s Survey on the Access to Finance of Enterprises, known as SAFE, which ran from February 19 through April 1 for its Q1 2026 round. That timing is crucial: it straddles the war’s start date, giving researchers a natural experiment to compare pre-war and post-war responses.

Before February 28, firms expected to raise their selling prices by 2.9% over the following twelve months. After the conflict began, that figure jumped to 3.5%.

One-year inflation expectations told a similar story. The median expectation among surveyed firms rose from 2.5% before the war to 3.0% afterward.

Three-year and five-year inflation expectations remained stable. Firms are treating this as a shock, not a structural shift.

Wage cost expectations actually ticked down slightly, landing at 2.8%. The survey also flagged negative outlooks for turnover, investment, and loan availability from banks. Energy-heavy sectors reported the most pessimistic readings across nearly every category.

The ECB’s revised macro picture

The ECB now projects 2026 headline inflation at 2.6%, with a Q2 spike expected to hit 3.1%. The ECB’s target is 2.0%.

GDP growth for the euro area got cut to 0.9% for the year.

War in the Middle East disrupts oil supply and pushes energy prices higher. Higher energy costs ripple through supply chains, raising input costs for manufacturers, logistics firms, and eventually consumer-facing businesses. Energy-intensive sectors, think chemicals, metals, glass, and heavy manufacturing, are the first dominos to fall, but the survey data suggests the expectation of higher costs is spreading well beyond those industries.

What this means for investors and crypto markets

The ECB’s projected Q2 inflation spike to 3.1% could force a difficult conversation about interest rates. If the central bank feels compelled to hold rates higher for longer, or even hike, that typically tightens financial conditions and reduces appetite for speculative assets. Crypto has historically been sensitive to liquidity conditions, and tighter money generally isn’t friendly to the space.

The stability of longer-term inflation expectations is worth watching closely. If three-year and five-year expectations start creeping up in future surveys, it would signal that firms are beginning to view the inflationary impact as structural rather than transitory. A temporary shock favors patience. A permanent regime change favors repositioning.

The 0.9% GDP growth forecast raises the question of whether European retail participation in crypto markets could stall if household budgets get squeezed by rising prices and stagnant wages.