New Delhi, June 16 -- European credit conditions are set to face more headwinds through end-2026 as the US-Iran war dragged on growth, lifted inflation and raised funding costs, but the outlook may now shift quickly, as per Fitch Ratings' mid-year update.

The US and Iran signed an MoU on June 16, paving the way for the Strait of Hormuz to fully reopen after 108 days of war. If energy costs fall and trade routes normalize, pressure on households, airlines and homebuilders could ease faster than Fitch projected. Still, inflation and higher rates will linger. Banking margins should hold up, but asset quality risks remain until confidence returns.

Fitch Ratings' research and projections were based on conditions before the US and Iran reache...