The Stoxx 600 Banks Index fell between 7% and 8.7% so far in 2026. This decline ends a 13-quarter streak of gains that began in the final quarter of 2022.
Geopolitical instability in the Middle East is driving the reversal. Surging energy prices have sparked fears of stagflation, combining low economic growth with high inflation.
The European Central Bank is now signaling a pause or potential rate hikes to manage inflation. These shifting interest rate expectations are dimming the sector's profit outlook and growth prospects.