A recent Reuters poll indicates European shares are expected to struggle for significant gains through the remainder of 2026, with only modest upside predicted. The broad STOXX 600 index is forecast to conclude the year at 645 points, an approximate 2.6% rise from current levels, according to the median of 14 analyst forecasts. Its 6.1% year-to-date increase occurred mostly in early 2026, prior to the Iran conflict. This tempered outlook stems primarily from economic repercussions of that conflict and Europe’s comparative lack of popular artificial intelligence (AI) related stocks.
The ongoing geopolitical tensions and resultant surge in energy prices are exerting considerable pressure on European company earnings. Even with renewed hopes for a deal to reopen the Strait of Hormuz, a critical global energy shipping route, businesses are bracing for impacts. The European Central Bank is also expected to raise interest rates, aiming to prevent energy price hikes from fuelling broader inflation. Jörn Spillmann, head of investment strategy at Zürcher Kantonalbank, highlighted Europe’s disadvantages compared to other regions, expecting the market to perform positively but still lag the global benchmark.
Another significant factor is Europe’s limited participation in the global technology rally driven by AI. While European tech stocks have climbed nearly 20% this year, they only comprise about 10% of the STOXX 600. This contrasts sharply with markets such as the S&P 500, up over 9% year-to-date, and MSCI’s broadest index of Asia Pacific shares outside Japan, which has gained 22%. Rajat Agarwal, an equity strategist at Societe Generale, suggested AI’s impact on the European market has largely manifested as foreign outflows. Despite these challenges, longer-term prospects for the STOXX 600 appear brighter, with median expectations for 2027 showing a slow but steady upward trend.
