Euro area financial stability overshadowed by Iran war: ECB

China

Euro area financial stability overshadowed by Iran war: ECB

2026-05-28 17:10 Last Updated At：20:37

The Iran war has triggered a major geoeconomic shock, which will shape the outlook of the euro area financial stability, the European Central Bank said on Wednesday.

"While the full impact of the war is unclear at this stage, the repercussions for the global economy and financial stability are becoming graver the longer it lasts," said ECB Vice President Luis de Guindos in the Financial Stability Review published on Wednesday.

"Prolonged geopolitical tensions and lingering fiscal challenges could test financial market sentiment and expose sovereign vulnerabilities," said the review.

The war is putting the resilience of the economic growth, which "surprised on the upside" at the turn of the year 2025-2026, to the test, de Guindos said.

The Iran war has brought a noticeable impact on the economy as global supply of energy and other commodities has been disrupted, growth prospects dented and energy prices elevated.

ECB chief Christine Lagarde noted at a press conference last month that the central bank will keep a close eye on incoming information to better assess the severity and duration of the fallout of the war.

De Guindos repeated that the energy supply shock poses upside risks to inflation and downside risks to economic growth.

"It could also increase market volatility and challenge debt servicing capacities as financing costs rise in an environment of weaker economic growth," said the ECB official.

At a time of heightened geoeconomic stress and uncertainty, de Guindos warned that financial asset prices, which "look stretched", leave markets vulnerable to sharp repricing.

In its staff macroeconomic projections published in March, the ECB revised the short-term growth outlook down. An ECB survey showed that consumers in the euro area in March were expecting markedly higher inflation after the breakout of the Iran war.

Serbian President Vucic visits birthplace of CPC

Serbian President Aleksandar Vucic on Thursday visited the Memorial of the First National Congress of the Communist Party of China (CPC) and the Site of the First National Congress of the CPC, learning about the history of the CPC over more than a century.

At the memorial, Vucic reviewed The Communist Manifesto and was amazed by an old photo of Pudong, which used to be occupied by farmland 36 years ago.

"It began to be built in the early 1990s. Just 36 years ago, there was nothing here. Now, it is the best city in the world," Vucic said.

Vucic then visited the Site of the First National Congress of the CPC, the birthplace of the CPC, and said it had been a long-held wish of his to see it.

"I wanted to see the place where the CPC was born, and it was here in Shanghai. Yesterday, I heard a story about the Red Boat and I wanted to get to know something more about CPC and its history, because I admire Xi Jinping and his leadership, and I believe that not only him, but some other people throughout Chinese history were delivering the very best results for Chinese people under the very, very difficult circumstances," said Vucic.

Asked about the outcome of the visit, Vucic said he was very satisfied and very happy.

"I'm very satisfied. I'm very happy and there to say I am jubilant about the results. First of all, about my meetings and getting the medal of friendship from President Xi. We reached a lot of important consensuses and arrangements and for the sake and for the benefit of both Chinese and Serbian people. And our cooperation will be strengthened and improved, and this is why I came here to prove the ironclad friendship between our two countries," said Vucic.

At the invitation of Chinese President Xi Jinping, Vucic arrived in Beijing on Sunday for a state visit to China from May 24 to 28.