The euro area’s private sector improved far more than expected in July, with activity returning to pre-escalation levels after the conflict with Iran, even as the latest flare-up threatens to weigh on sentiment again.

The composite purchasing managers’ index, compiled by S&P Global, rose to 51.9, moving back above the 50-point line that separates growth from contraction for the first time since March.

That reading, whose details were shared by business outlet Newmoney, beat the forecasts of almost every economist in a Bloomberg survey, which had put the median estimate at a marginal rise to 50.2.

The survey, carried out from July 9 to July 22, showed that the two biggest economies in the region also outperformed expectations.

Germany posted an unexpected jump well above 50, ending three months of contraction.

France, by contrast, remained in decline, though the pace of contraction eased to its mildest since February.

“July records a welcome revival in economic activity in the euro area,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

“However, the volatile geopolitical environment means it remains to be seen whether the good news will last,” he added.

With oil prices rising again and concerns over sea transport intensifying, “there is a risk that the economy could relapse if inflationary pressures build again and supply chain disruptions — especially in energy — derail this rising recovery,” he warned in a statement on Friday.

The 21-member bloc has shown notable resilience to events in the Middle East, which have pushed up consumer prices and dented confidence.

Even so, worries about a sharper slowdown remain, especially after the freezing of peace talks between Washington and Tehran and the renewed escalation in military attacks over the past two weeks.

The latest surge in oil and gas prices also raises the risk of stronger inflationary pressures.

On Thursday, the European Central Bank (ECB) kept borrowing costs unchanged, but officials are said to be ready for another increase in September, according to sources familiar with the matter.

Even so, Friday’s survey contained some encouraging signs for inflation, with cost pressures easing sharply to their lowest level since the outbreak of the war, helping to slow the pace of selling price increases in goods and services.

“This will ease pressure on the ECB in terms of any immediate need for further rate rises,” Williamson said.