Euro-area authorities report that geoeconomic risk has surged in early 2026, driven by renewed trade tensions, defence concerns, and the ongoing Middle‑East war. A new composite indicator that aggregates 12 defence, trade and financial metrics hit an all‑time high in March 2026, exceeding levels seen after the 2025 U.S. tariff announcement. The indicator shows that a one‑standard‑deviation shock raises financial stress and dampens the financial cycle, while pushing the lower tail of GDP growth higher than the upper tail over the next six quarters. Econometric analysis indicates that sustained risk elevation could weaken economic activity and stability in the euro area, according to the European Central Bank’s Financial Stability Review.
© European Central Bank, 2025.
Summary derived from the ECB website (https://www.ecb.europa.eu ).
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