Market strategists remain optimistic about European equities despite escalating inflation concerns stemming from the Iran conflict, projecting a rebound to record levels, per a Bloomberg survey. This sentiment persists even as geopolitical tensions drive energy prices upward, historically a key inflation trigger for European markets. The strategists' confidence hinges on expectations that central banks will maintain accommodative monetary policies and that corporate earnings will withstand inflationary pressures. European stocks are seen as undervalued relative to historical averages, with analysts citing potential upside from sector rotations toward defensive industries.

The outlook suggests investors may soon shift capital from defensive assets back into cyclical sectors, though volatility remains a near-term concern.