European Earnings Preview: Who Wins and Who Loses From the Iran War?

Why It Matters

The earnings mix shows the war is redistributing profit to energy firms while exposing vulnerability in other sectors, shaping investor expectations for ECB policy and European growth.

Key Takeaways

• Energy sector earnings up ~25%, powering overall STOXX 600 gain
• Non‑energy earnings growth stalls at ~1.5%, near stagnation
• Luxury revenues hit by 50% Middle East drop, cutting growth outlook
• ASML forecasts 12% revenue rise, underscoring semiconductor demand
• ECB likely raises rates to 2.5%, risking stagflation for banks

Pulse Analysis

The first‑quarter earnings window in Europe is unfolding against a backdrop of geopolitical tension and macro‑economic strain. The Iran‑Israel conflict has pushed Brent crude above $100 a barrel, lifting energy‑sector earnings by roughly 25% and inflating euro‑zone inflation to 2.5% in March. Analysts now expect the European Central Bank to lift its deposit rate to 2.5%, a move that could curb inflation but also risk stagflation as real GDP growth is revised down to 0.9% for 2026. These dynamics are reshaping profit expectations across the STOXX 600.

Sector performance is highly uneven. While energy firms generate a near‑25% earnings surge, the remaining industries collectively post a modest 1.5% gain, barely outpacing stagnation. Luxury houses such as LVMH and Kering see revenue forecasts slashed after a 50% plunge in Middle‑East sales, and BMW’s earnings per share of €2.90 (about $3.20) signal a 14% YoY decline. In contrast, semiconductor leader ASML projects 12% revenue growth, with net sales of €8.5 billion (≈ $9.4 billion) and a robust 51‑53% gross margin, highlighting the durability of AI‑driven chip demand.

For investors, the earnings season serves as a stress test of European corporate resilience. Banks stand to benefit from higher rates that could boost net‑interest margins, yet credit risk may rise as consumers and energy‑intensive firms grapple with higher financing costs. The energy windfall masks underlying fragility, prompting market participants to watch closely for guidance on capital allocation, buybacks, and exposure to Gulf supply disruptions. Ultimately, the data emerging this April will influence both short‑term equity positioning and longer‑term views on Europe’s growth trajectory amid ongoing conflict.