In Q3 2026, tensions in the Middle East continued to escalate. Attacks between the United States and Iran resumed and expanded to include pro-Iranian militias in Iraq and Yemen. In addition, attacks on energy infrastructure in Saudi Arabia temporarily forced the closure of the East-West pipeline, one of the main alternatives for exporting oil while bypassing the Strait of Hormuz.

The conflict in the Middle East has affected the major economies, mainly through higher energy prices, which have led to upward pressure on inflation. In addition, services inflation has remained elevated. In Spain, inflation rose from 3.6% year-on-year in June to 5.0% in September, its highest level since early 2023, while core inflation stood at 3.5%.

Economic activity has continued to demonstrate resilience, supported by investment linked to artificial intelligence, although pockets of weakness persisted in some economies, such as China.

In Europe, economic performance has also been supported by Germany’s fiscal expansion programme. This is despite tensions within the German coalition government that are delaying the implementation of structural reforms.

In Spain, the economy continued to perform strongly, supported by the strength of the services sector, tourism and employment.

Central banks have maintained a restrictive stance in response to increasing inflationary pressures. The European Central Bank (ECB) raised interest rates again in September, bringing the deposit facility rate to 2.50%, while the Federal Reserve increased the target range for its policy rate to 3.75%-4.00% and maintained a hawkish stance.

Long-term sovereign bond yields have risen sharply, reaching multi-year highs. In addition, in France, the sovereign risk premium increased significantly to its highest level since 2012, reflecting concerns over the fragility of its public finances and the government’s difficulties in securing approval for a budget that includes fiscal consolidation measures.

Finally, the US dollar has been supported by a renewed increase in oil prices, a more hawkish Federal Reserve stance and concerns surrounding the fiscal situation in France.

*Source: Bolsas y Mercados Españoles (Spanish stock market operator)

1. Price not adjusted for dividends. Adjusted value: +27.0%

Source: Bloomberg. Data rebased to 100 at the start of the period, adjusted for capital increases, dividends, stock splits, etc.

(i) Past performance is no guarantee of future returns.