4% Growth|ECBs First Hike in Years

The Earnings Everyone Expects

European companies are entering earnings season with a number that looks reassuring on the surface. STOXX 600 firms are projected to report first-quarter earnings growth of 4%, according to LSEG data — positive territory, even after 39 days of war in the Middle East and an energy price shock that sent oil past $100 a barrel. Markets have largely priced this in. The FTSE 100 is tracking weekly gains. Shell, BP, and Barclays are set to report within the next month. The narrative heading into results is that European companies absorbed the Iran shock better than feared.

The trouble is, that narrative was assembled before the ceasefire existed, before the Strait of Hormuz was threatened with tolls, and before the ECB signaled something it hadn't done in years. Eurozone inflation reached 2.5% in March. Energy costs drove the spike. And the ECB, which has spent the better part of two years cutting rates, is now expected to raise them for the first time since the hiking cycle that ended in late 2023. That is a very different backdrop than what companies were guiding against when Q1 began in January.

What Has to Be True for 4% to Hold

The 4% earnings growth consensus rests on three premises, and each one has a pressure point.

The first is that energy costs were elevated but contained during Q1. That was true for most of the quarter — the Iran conflict escalated sharply in late February, meaning oil above $100 was a March phenomenon, not a January-through-March one. Companies reporting Q1 numbers will largely reflect a partial hit. The real energy cost question belongs to Q2 guidance, which executives will deliver alongside these results. The BBC and Reuters both reported this week that jet fuel hit an all-time high of $1,838 per tonne, against $831 before the war began. Airlines, logistics firms, and manufacturers will carry that number into their forward outlooks.

The second premise is that the ceasefire holds and energy prices continue their retreat. Oil did fall 14% when the ceasefire was announced, back to $93.93 a barrel. But the ceasefire is two weeks old, fragile, and contingent on Iran reopening the Strait of Hormuz — the terms of which remain unresolved. Capital Economics noted this week that whether Iran levies tolls on Hormuz shipping, and in what form, is still an open question. North Sea crude rose to a record high just days ago as anxiety about the ceasefire's durability pushed prices back up. The 4% growth number assumes energy relief that has not yet arrived in any durable form.

The third premise — and the most consequential — is that the ECB remains accommodative enough to support corporate borrowing costs. That premise has now been withdrawn. The ECB is expected to hike rates for the first time in years, a development driven entirely by the Iran-linked energy shock. European companies reporting Q1 results this month will face questions not just about what happened in the first three months of 2026, but about how they plan to fund operations in a rising-rate environment that simply did not exist when they last gave guidance. The European earnings preview published this week put it plainly: the numbers landing from mid-April will do more than tell investors how Q1 went. They will set the tone for how much worse it could still get.

What the Numbers Cannot Tell You Yet

The 4% growth headline will likely print. Q1 data is what it is, and most of the Iran shock arrived late enough in the quarter that it won't fully show up in first-quarter results. What will matter more is the revision cascade.

Companies that guide Q2 below current analyst estimates will force a repricing of the full-year earnings picture for the STOXX 600 and the FTSE 100. Barclays is among the names the market is watching closely — its results arrive within the next four weeks, and analysts have flagged that the next four weeks are, in their words, going to be big for the stock. Shell has already been downgraded to Hold by Rothschild and Co Redburn, and TD Cowen lowered its price target this week, even as oil prices remain elevated relative to pre-war levels. The market is beginning to price in a ceiling on energy sector upside, not a floor.

The weight of evidence leans toward a guidance disappointment cycle rather than a clean earnings beat. That holds if the ECB proceeds with its first rate hike, if energy costs stay above $90 per barrel through May, and if the Strait of Hormuz situation remains unresolved past the two-week ceasefire window. If all three of those conditions hold, the 4% Q1 beat becomes a setup for downward revisions, not a springboard.

The recovery scenario is real but narrow. If the ceasefire extends, if Iran opens Hormuz without tolls, and if the ECB delays its hike citing demand destruction — all of which are possible — then Q2 guidance may hold closer to current consensus and the STOXX 600 and FTSE 100 recover from here. The benchmark to watch is the Brent crude price over the next two weeks: if it falls and holds below $85, the guidance cycle becomes manageable. If it holds above $95 when Barclays and Shell report, expect the revision cycle to begin.