Barclays warns of a possible oil price shock that could significantly weigh on the profit expectations of European companies.
• Barclays says European earnings estimates are too high and at risk if oil prices rise
• Weaker growth and rising interest rates increase the risks of stagflation
• Sectors and countries are affected to varying degrees
Consensus too optimistic – Barclays much more cautious
As Investing reports, citing an assessment by the British financial services provider Barclays, the consequences of the Middle East conflict have so far only been partially taken into account in the earnings expectations for European stocks. A further increase in the price of oil could significantly weaken profit growth and at the same time put additional pressure on the already elevated valuation levels.
Consensus estimates for European companies’ earnings per share (EPS) continue to assume growth of 13 percent in 2026, it said. According to Barclays, however, this number paints an overly optimistic picture of actual developments: Adjusted for base effects in the automotive sector, underlying growth is likely to be in the range of 8 to 9 percent, reports Investing. In addition, assuming an oil price of 85 to 90 US dollars per barrel, the bank only expects an increase of 6 percent.
According to analysts, a rise in oil prices above $100 could also trigger a “non-linear effect on earnings.” According to the bank, in this scenario a decline in profit growth to low single digits would be likely. The oil price for a barrel of Brent is currently quoted at $98.67 (as of April 13, 2026).
growth and monetary policy under pressure
As the report further shows, the bank has revised its GDP forecasts downwards: For the Eurozone Growth is now expected to be 0.8 percent and for the United Kingdom 0.7 percent. At the same time, Barclays expects that the European Central Bank (ECB) will raise interest rates twice. According to the analysts, this is exacerbating “the less favorable relationship between growth and monetary policy against the backdrop of increasing risks of stagflation.”
At the same time, Barclays emphasizes that, despite a similarly strong increase in oil prices, the current situation differs significantly from the energy crisis of 2022, as gas and electricity prices have so far developed far less dynamically and Europe is also less dependent on energy imports from the Middle East than it was previously on Russian deliveries.
Valuations in focus – further downside potential
European stocks have already become cheaper, but remain above the long-term average and could fall further if the escalation continues: “Valuation multiples could continue to decline in a sustained oil price shock scenario, with the SXXP falling to around 550 points in our view if oil prices stabilize at around $100 per barrel or above – or even lower if recession risks increase,” Investing reports, citing Emmanuel Cau’s team. “At the same time, a rapid de-escalation could provide some breathing room for valuations and P/E multiples could rise back towards previous highs,” it added.
The bank is also sticking to its base scenario of a price target of 620 points.
Sectors and regions affected differently
According to Barclays, a differentiated picture emerges at the sector and country level: in the event of a de-escalation, sectors such as banks, mining, capital goods and cyclical consumer goods benefit, while if tensions persist, defensive sectors such as consumer staples and the Pharmaceutical industry are at an advantage. At the country level, Barclays prefers British stocks because the FTSE 100 is considered comparatively resilient due to its high energy weighting and low domestic market dependence – similar to the situation in the Ukraine war.
Svenja Polonyi, editorial team at finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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