Unexpected 0.4% Rebound! Eurozone February Industrial Output Turns Positive, But ING Warns Middle East Tensions Could Push Production Back into Contraction

Eurozone industrial output unexpectedly increased on a monthly basis in February, ending two consecutive months of decline, but this brief improvement fails to alter the outlook: as the war in the Middle East continues to drive up energy prices, the risk of production contracting again in the coming months is accumulating. Eurostat announced on Wednesday that eurozone industrial output rose 0.4% month-on-month in February, reversing January's 0.8% drop. According to economist surveys, markets had previously expected a 0.1% decline in February output; actual performance significantly outperformed expectations. However, Bert Colijn, Chief Economist at ING Groep Netherlands, warned that "the war in the Middle East has dashed hopes for a broad-based industrial recovery in the eurozone," and stated "do not expect a rebound in the near term." On Tuesday, the International Monetary Fund (IMF) also downgraded its 2026 economic growth forecast for the eurozone from 1.3% to 1.1%, citing a "major energy crisis" that could arise if the Middle East conflict remains unresolved as a key downside risk. Previously, buoyed by German government fiscal stimulus and a recovery in market sentiment, eurozone industrial activity showed signs of stabilization at the end of 2025. However, the sharp rise in oil and gas prices is expected to impose new systemic pressures on the industrial sector starting in March, making sustained recovery still distant. Imbalanced Growth Structure: Only Italy Records Positive Growth Among Five Major Economies The growth in February industrial output was primarily driven by smaller economies within the eurozone. Among the five largest member states of the currency union, only Italy recorded positive output growth, while the other four major economies all contracted, reflecting that the foundation for industrial recovery in the eurozone remains quite weak. Bert Colijn remarked that "the start of 2026 has been disappointing." Despite some warming optimism among manufacturers regarding prospects for infrastructure and defense investment, the impact of the war in the Middle East has dashed hopes for widespread recovery. The Ifo Institute in Germany noted that the Iran war has already dealt substantial blows to energy-intensive industries in the eurozone, affecting core manufacturing sectors including automotive, chemicals, pharmaceuticals, and mechanical engineering. Economists point out that the current energy shock is not yet as severe as the energy crisis triggered after the Russia-Ukraine conflict, but if the Middle East conflict drags on, the threat to the industrial sector will continue to intensify. The sharp rise in oil and gas prices is expected to further drag down industrial output starting in March. IMF Downgrades Growth Forecast, Recovery Prospects Remain Unpromising On Tuesday, the IMF downgraded its 2026 growth forecast for the eurozone from 1.3% to 1.1%, explicitly listing a "major energy crisis" that could result from the failure to achieve lasting peace in the Middle East conflict as a core downside risk. Regarding future trends, ING's Bert Colijn was direct: "Do not expect a rebound in the near term." Risk Disclosure and Disclaimer Investments involve risks; caution is advised. This article does not constitute personalized investment advice and does not account for individual investors' specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions presented herein are suitable for their particular circumstances. Investment decisions made based on this content are undertaken at the user's own risk.