The European Securities and Markets Authority (ESMA) published its first 2026 risk monitoring report on Wednesday, warning that EU financial markets face elevated systemic and market risks despite resilient performance in the second half of 2025.
The regulator’s underlying risk assessment was completed before the US and Israel launched joint strikes on Iran in late February. But ESMA said early market reactions to the war have validated the transmission channels and sensitivities it had already identified.
The conflict has driven sharp increases in energy and commodity prices. Brent crude surged to $119.50 per barrel on Monday before plunging 14.5% after US President Trump predicted the war would end “very soon,” according to BNN Bloomberg. The effective closure of the Strait of Hormuz, through which roughly one-fifth of global oil and gas supply typically transits, has forced major regional producers to cut output.
“The recent escalation of conflict in the Middle East continues to significantly affect markets, leading to sharp increases in energy and commodity prices, as well as elevated volatility,” ESMA Chair Verena Ross said.
“ESMA’s latest risk monitoring analysis highlights the potential for disorderly corrections that could spill over across markets. In this context, disciplined risk monitoring and risk management remain essential to ensure orderly markets, a core objective for ESMA.”
Beyond energy volatility, the report flagged that record-high global equity valuations in the second half of 2025 and early 2026 have left markets highly sensitive to negative news. Rising price correlations across asset classes compound that fragility, as diversification benefits erode. European sovereign bond liquidity weakened slightly amid macroeconomic uncertainty, according to the report.
ESMA also warned that cyber and hybrid threats continue to grow in scale and sophistication, increasing the risk of operational disruptions. Central Securities Depositories experienced surges in settlement fails for ETFs in April 2025, and for UCITS and equities in August and September.
The report was published as ESMA continues to expand its supervisory role across EU trading and post-trading infrastructures, with retail investor protection and operational resilience among its stated priorities through 2028.
