The European Central Bank said that investors are underestimating risks such as the Iran war, and there is a possibility of a sudden and sharp market correction.

The European Central Bank warned that financial markets face the risk of a sudden and significant adjustment due to investors downplaying multiple threats, including the Iran war. In its semi-annual Financial Stability Review released on Wednesday, the European Central Bank stated that despite some adjustments in the markets recently, asset prices still appear "overvalued" when measured against historical standards, and the downside risks from geopolitical, fiscal, and macrofinancial situations seem to be "underestimated". European Central Bank Vice President Luis de Guindos said, "This makes the markets prone to sharp revaluations. If this were to happen, non-bank financial institutions could amplify market volatility." Guindos, who has been responsible for financial stability matters in the eurozone's 21 countries for 8 years, is set to retire this month.