Middle East conflict puts energy efficiency back at the heart of eurozone housing
The current Middle East conflict underscores a renewed urgency for energy efficiency within the eurozone housing market, as highlighted by recent commentary from ing-think. Per the full note, rising energy prices—exacerbated by geopolitical tensions—are deflating consumer confidence and driving up inflation fears, complicating the eurozone's fragile economic recovery. The desk views this dynamic as detrimental to housing activity, with significant impacts on mortgage lending and affordability, further influencing monetary policy expectations. As a result, the collective outlook remains cautious amidst these pressures, with no key calendar events detected that could abruptly shift market sentiment.
What the desk is arguing
The current geopolitical instability, particularly the ongoing conflict in the Middle East, has reignited the focus on energy efficiency in eurozone housing markets. Per the full note, this shift stems from rising energy costs that have effectively moderated consumer confidence and intensified inflation worries, complicating an already fragile economic recovery.
Housing affordability, compounded by increased borrowing costs, further constrains market activity. The article mentions that new mortgage lending decreased by 6% quarter-on-quarter in Q1 2026, signaling lingering demand challenges. Despite a brief recovery in March, the desk believes this is insufficient to indicate sustained demand, as higher financing costs limit growth in the sector.
Where it sits in our coverage
Our consensus target stands at 1.075, with a tight range of 1.04 to 1.12. Notable targets in this context include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This perspective aligns closely with jpmorgan's target, while bofa sits at the lower bound, indicating a potential divergence in sentiment on eurozone housing impacts and currency stability.
How other firms see it
Firms like jpmorgan are aligned in their focus on energy efficiency's relevance to housing prices amidst rising energy costs. Conversely, bofa offers a more cautious stance, reflecting different outlooks on eurozone resilience in the current climate.
The EUR/USD currency pair is directly influenced by these dynamics, with fluctuations likely influenced by ongoing assessments of the economic fallout from the conflict. Attention should be drawn towards central bank communications regarding interest rate trajectories in light of inflation expectations.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Ongoing Middle East tensions are elevating energy prices and inflationary pressures in eurozone markets.
- 02New mortgage lending has seen a notable decline, indicating macroeconomic vulnerabilities.
- 03The housing market faces affordability challenges that will likely cap price growth.
- 04Energy efficiency is becoming increasingly vital as both a financial and sustainability metric.
Market implications
Traders should watch the EUR/USD for potential shifts that could result from the evolving geopolitical landscape. Increased energy costs could lead to more pronounced moves in the currency should inflationary pressures heighten central bank rate expectations.
Risks to this view
A significant de-escalation in Middle East tensions, leading to lower energy prices, could reverse the inflationary trends currently affecting eurozone sentiment and housing markets. Additionally, unexpected central bank actions or more positive economic data could shift the current cautious outlook.
Articles Middle East conflict puts energy efficiency back at the heart of eurozone housing 11:31 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download While the tentative US-Iran agreement has somewhat eased tensions, the Middle East conflict continues to cloud the eurozone’s short-term housing outlook and reinforce the focus on energy efficiency Franziska Biehl , Sander Burgers and Alissa Lefebre A fragile recovery meets another shock Despite the recent tentative US-Iran agreement, tensions in the Middle East continue to weigh on the eurozone economy. What initially appeared to be a continuation of last year’s gradual recovery at the start of 2026 has quickly become more fragile. Higher energy prices have revived inflation fears, pushing up rate hike expectations and market interest rates, and weighing on confidence.
The housing market will feel the impact too. This comes at a time when the housing market was already losing steam. In the first quarter of 2026, new mortgage lending to households in the eurozone fell by 6% quarter-on-quarter and was down 1% year-on-year.
March brought a temporary rebound, with new business volumes rising by more than 10% year-on-year, but this may have reflected front-loading rather than a genuine and sustained pick-up in demand. Looking ahead, higher financing costs and weaker purchasing power are likely to weigh more visibly on housing activity in the shorter term. House prices should continue to rise modestly, supported by structural factors, but stretched affordability is likely to cap price growth and weigh on mortgage lending.
Energy efficiency moves back up the agenda However, the Middle East war has affected the eurozone housing market through another channel as well. Higher energy prices have pushed energy efficiency back into the spotlight. Not only as a sustainability issue, but as a question of affordability, resilience and value.
Oil accounts for around 10% of household energy consumption in the EU, but exposure differs widely: from more than a quarter in Belgium and around one-fifth in Germany to less than 1% in the Netherlands. Natural gas remains the more important energy source in most countries. Still, while oil is not the dominant household energy source in most EU countries, the recent rise in oil prices appears to have been enough to revive broader concerns about energy costs.
Since the beginning of the war, Google searches for heat pumps and solar panels have risen significantly. In Germany, interest in both has recently reached its highest level since 2023. Oil prices and Google searches for heat pumps and solar panels (Index ((week of the 27.02.2026 = 100)) & 3-week moving average for Google Trends) Source: Google Trends, LSEG Datastream "> Source: Google Trends, LSEG Datastream This pattern also shows that interest fades as oil prices fall, suggesting green renovation is still driven more by cost considerations than by environmental motivation.
Our ING Consumer Survey from last September points in the same direction: among homeowners who renovated in the past three years, energy savings were the primary driver. In Germany and Belgium, more than two-thirds cited this, while in the Netherlands the share was lower but still around 50%. The 'G-Factor' is staging a comeback As energy efficiency moves back up the agenda, the “G-Factor”, the degree of greenness of a property, is likely to matter more for house prices again, too.
The 2022 energy crisis showed how quickly energy efficiency can become a decisive pricing factor. In Germany and the Netherlands, the green premium peaked in 2024. In Germany, homes with poor energy efficiency were priced around 40% below A+ properties at the peak, compared with 20% in 2021.
Part of this gap is likely to reflect other property characteristics as well, such as build year, construction quality and renovation status, which often coincide with lower energy ratings. In the Netherlands, by contrast, energy-efficient homes carried a 23% premium per square meter compared with the least efficient homes in 2024 , up from 7% in 2021, according to property consultants Brainbay, with these estimates corrected for factors such as build year and construction quality. Belgium shows a similar pattern.
According to a study by the National Bank of Belgium , energy performance has long been an important driver of house prices. Between 2016 and 2022, price differences between energy labels were already sizeable but relatively stable. Since 2023, however, the gap has widened markedly: prices for more energy-efficient homes, those with labels A, B and C, have continued to rise, while prices for less efficient homes, those with labels E and F, have edged down.
Last year, the premium remained sizeable but narrowed slightly, at least in Germany and the Netherlands. Now, it may be widening again. In Germany, discounts for energy-inefficient homes increased in April and May, averaging 26%, compared with 24% in the first quarter of 2026.
Price deviation of German residential properties by energy-efficiency class relative to A+ (in %) Source: ING "> Source: ING A cloudier outlook, but a greener direction For the eurozone housing market, the war in the Middle East has made an already complex outlook even harder to read. In the short term, weaker affordability, renewed inflation pressure and heightened uncertainty are likely to weigh on activity. In the longer term, structural forces, like supply shortages, demographic pressure and the green transition, look set to continue to support prices.
Regulation was already pushing the market in the same direction. Under the EU’s revised Energy Performance of Buildings Directive, member states should reduce the average primary energy use of residential building stock by at least 16% by 2030, compared with 2020 levels, with a significant share of the savings coming from the worst-performing buildings. Implementation will differ across countries, but the direction is clear: greener homes are becoming a structural feature of Europe’s housing markets.
The latest energy shock has only added urgency. As energy prices rise again and memories of the last crisis resurface, the “G-Factor” is moving back to the forefront. The short-term housing outlook has become cloudier, but the long-term direction has become clearer: energy efficiency is no longer a “nice to have”, but an increasingly decisive factor for value and affordability.
The “G-Factor” was already shaping Europe’s housing markets. Now, the latest energy shock is strengthening its role further. Housing market Eurozone Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Franziska Biehl Senior Economist, Germany Franziska is a Senior Economist in Frankfurt. She mainly covers the German and Austrian economies.
She joined ING in September 2020 after finishing her master’s degree in economics at… Sander Burgers Senior Economist, Dutch Housing Sander is based in Amsterdam and focuses on the Dutch Housing Market. He analyses market trends and forecasts future developments. He shares these insights with colleagues, clients and the media… Alissa Lefebre Economist Alissa is an economist at ING Belgium.
She joined the firm in 2024 and covers the Belgian real estate and construction sector. Prior to this, she was a PhD student at KU Leuven. In this article A fragile recovery meets another shock Energy efficiency moves back up the agenda The 'G-Factor' is staging a comeback A cloudier outlook, but a greener direction
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