The European Central Bank (ECB) vice-president, Luis de Guindos, said in Tallinn that direct exposures of eurozone banks to the Middle East “are limited.”
“Contagion to the eurozone financial sector has remained contained,” Guindos added during a speech at a conference commemorating economist Ragnar Nurkse, organized by Eesti Pank, Estonia’s central bank.
Guindos emphasized that the eurozone banking system is well-positioned, with strong profitability and robust capital and liquidity buffers.
Read more about this topic: Conflict in the Middle East could drive up oil prices and shake the world. Markets in panic
“EU market infrastructures, including central counterparties serving energy markets, have effectively managed margin requirements despite volatility,” he noted.
He also highlighted that, generally, markets expect the Middle East conflict to be short-lived.
However, Guindos warned that the conflict could still create financial tensions due to already high global uncertainty. “It threatens to disrupt market sentiment at a time when asset valuations are elevated, potentially triggering sharp risk adjustments for leveraged borrowers and governments, and amplifying stress in the non-bank sector,” he said.
