Eurozone business activity unexpectedly contracted for the first time since late 2024, as tensions in Iran weighed on consumers, leading to a sharp decline in the services sector.

The Composite Purchasing Managers' Index (PMI) compiled by S&P Global fell to 48.6 in April, dropping below the 50-point threshold that separates expansion from contraction. The previous month's reading was 50.7, while analysts had anticipated a decline to only 50.1.

This trend mirrored developments in Germany, where industrial activity remained stable but the services sector experienced a significant downturn. In France, manufacturing performance exceeded expectations, reaching its highest level since 2022, although services also declined. Price pressures continued to rise across the region.

"The Eurozone is confronting growing economic difficulties stemming from Middle East conflicts, presenting significant challenges for policymakers," stated Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, in a Thursday announcement. "At the same time, increasingly widespread supply shortages are likely to further restrain economic growth and exert additional upward pressure on prices in the coming weeks."