The European Central Bank’s May 2026 Financial Stability Review notes growing risks to euro‑area financial stability from the war in the Middle East, energy supply disruptions, and high asset valuations. The conflict disrupted shipping through the Strait of Hormuz, driving sharp rises in oil and gas prices and increasing inflationary pressure. Markets have adjusted but remain highly valued, leaving them vulnerable to abrupt repricing. Non‑bank financial intermediaries are exposed to liquidity and leverage risks, while banks, though still well‑capitalised, face tighter funding conditions and potential credit, liquidity and funding vulnerabilities. Public finances are under pressure from defence spending and energy price shocks, further amplifying fiscal and sovereign risk concerns.
© European Central Bank, 2025.
Summary derived from the ECB website (https://www.ecb.europa.eu ).
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