On May 27th, the European Central Bank warned that financial markets are facing the risk of a sudden and significant pullback, as investors may underestimate a range of threats including the Iran war. The European Central Bank stated in its semi annual Financial Stability Assessment Report on Wednesday that despite recent market adjustments, asset prices still appear "high" compared to historical levels. The report points out that the downside risks at the geopolitical, fiscal, and macro financial levels seem to be "underestimated" by the market. European Central Bank Vice President Jindos said, "This makes the market prone to drastic repricing. Once there is volatility in the financial market, non bank financial institutions may amplify this volatility." The European Central Bank emphasized that the eurozone sovereign bond market is still operating in an "orderly manner," with narrow spreads, but also warned that the proportion of price sensitive investors such as hedge funds is increasing, and fiscal sustainability issues in some countries, including the United States, may trigger or amplify sudden repricing of risk assets. These risks mean that controlling fiscal expenditures has become even more important. The European Central Bank also warned that there are financial stability risks in the private credit market.