Energy sector profits drive 14.5% European earnings growth in Q2

European blue-chip earnings are set to grow 14.5% in the second quarter, driven by a 109.3% surge in energy sector profits, forecasts show.

"Energy is forecast to lead sector earnings growth at 109.3%, followed by basic materials at 46.3%," Tajinder Dhillon, senior analyst at LSEG I/B/E/S, said.

Excluding the energy sector, profit growth for STOXX 600 companies falls to 5.5%, the data show. Technology earnings are seen rising 14%, consumer cyclicals 11.5% and industrials 7.6%. Utilities and healthcare are expected to post declines of 1.7% and 2.7%, respectively. Revenues for non-energy companies are forecast to increase 5.1% on average.

The upbeat outlook follows a volatile quarter that saw Brent crude surge above $100 a barrel on Iran war supply fears before retreating to around $70 after a June interim agreement. The STOXX 600 has recovered from its post-war losses to trade up about 9% year-to-date, already meeting J.P. Morgan's year-end target and prompting the brokerage to raise its 2026 full-year estimate on Monday.

The divergence between energy and the rest of the market shows how heavily Europe's earnings outlook depends on oil and gas groups. Basic materials is the only other sector expected to post growth above 20%, at 46.3%.

Jefferies economist Mohit Kumar said the U.S. and Iran would likely reach a deal, but it would be a "patch" rather than a long-term solution, leaving some uncertainty as peace talks struggle to make headway.

The energy-driven earnings boost provides a tailwind for European equities, but the narrow base of growth raises questions about sustainability if oil prices normalize. Investors will watch second-quarter reports starting this month for signs of whether non-energy sectors can close the gap.

This article is for informational purposes only and does not constitute investment advice.