The first earnings season of 2026 is crucial for European companies, reporting against a backdrop of a Middle East conflict, rising energy prices, and anticipated ECB interest rate hikes. While STOXX 600 companies are expected to report a 4% earnings growth, this is largely driven by the energy sector, with other sectors showing minimal growth. The war has exacerbated existing economic challenges, leading to a projected GDP growth downgrade and rising inflation. Key companies like LVMH and BMW are facing significant pressures, while ASML shows resilience in the semiconductor market. The earnings season will serve as a stress test for corporate resilience amid ongoing conflict.