European Bank Stocks to Snap Record Quarterly Run on Iran, AI

European bank stocks are set to end a historic 13-quarter rally in Q1 2026, marking their first decline since 2022, as geopolitical and market pressures outweigh prior earnings optimism. The Iran conflict’s escalation has disrupted trade flows and heightened risk aversion, prompting investors to pull capital from European financial institutions amid fears of regional economic instability. A sharp exodus from private credit markets is compounding losses, as institutional investors shift assets to safer havens, reducing liquidity and pressuring bank balance sheets. Strong earnings and shareholder returns—key drivers of the prolonged rally—are now overshadowed by macroeconomic risks, eroding confidence in the sector’s near-term resilience. Analysts warn the downturn may persist if geopolitical tensions or credit market volatility intensify, signaling potential broader financial contagion across Europe.