BERLIN (DPA, CONVERSEER) – Confidence in the German economy sank in March as a result of the war in Iran, a leading institute said on Wednesday.
The ifo Institute’s business climate index fell by two points to 86.4 points, mirroring analysts’ expectations.
“The war in Iran has put an end to hopes of an upturn for the time being,” commented ifo President Clemens Fuest on the results of the monthly survey of 9,000 companies.
Although companies’ assessment of their current situation remained unchanged, their outlook for future business was significantly more pessimistic.
Sentiment deteriorated across industry, the service sector and the retail sector. In the construction sector, expectations fell more sharply than at any time since the war in Ukraine began in early 2022.
Oil and gas prices have surged as a result of the conflict, which was launched by the United States and Israel on February 28.
This is fuelling concerns of a rise in inflation and a lower-than-expected upturn for the German economy, which narrowly escaped a third consecutive year of recession in 2025.
Billions in government spending on infrastructure and defence were expected to lift growth to around 1% of gross domestic product this year, but forecasts have already been adjusted due to the war.
“The German economy’s fragile hopes for recovery are fading fast due to the crisis in the Middle East,” wrote Christoph Swonke, an economic analyst at DZ Bank. The bank now expects growth of just 0.8% in 2026 due to the war.
