The economic consequences of the Iran war are clear Effect on German companies. The ifo business climate index fell to 86.4 points in March, after 88.4 in February, as the Munich ifo Institute announced based on its survey of around 9,000 managers. This is the lowest level since February 2025.
The companies were just as skeptical about their current situation as before, but rated their prospects noticeably worse. “The war in Iran ends the hope of an upswing for the time being,” said Ifo President Clemens Fuest.
Industry suffers from high energy costs
According to the institute, economic growth of 0.1 percent is likely at best in the first quarter that is coming to a close, which is likely to be followed by stagnation in the spring. The ifo Institute expects growth to be expected again in the second half of the year, driven by government investments in infrastructure and armaments amounting to billions. “The upswing
is shifting back a bit,” said the head of surveys at the Munich Economic Research Institute, Klaus Wohlrabe.
In industry, energy-intensive sectors such as chemicals and plastics in particular suffered from increased costs. Among service providers, the transport and logistics sector is particularly affected by higher petrol and diesel prices. “Retailers, in turn, fear a loss of purchasing power of their customers as a result of higher inflation,” said Wohlrabe. A positive trend is therefore not to be expected in tourism either. The construction industry, in turn, fears rising interest rates, which would make financing construction projects more expensive.
Worries about delivery bottlenecks and inflation
Many experts had expected the business climate index to decline. The collapse in business expectations reflects German companies’ concerns about the Iran war, said Commerzbank chief economist Jörg Krämer. “If the war and the closure of the Strait of Hormuz last another month or two, the economic damage to Germany would be clearly noticeable.”
The attacks by Israel and the USA on the Iran and the subsequent Iranian attacks on the oil industry in several Gulf states have driven up energy prices significantly. This increase is fueling concerns about supply bottlenecks and rising inflation and is slowing the economy in Germany and the euro zone. Economists have already lowered their forecasts for the 2026 economy in Germany. Actually, the additional spending of the state budget on infrastructure and defense of the economy should be after two years of recession and a mini-growth last year gain weight again.
The hoped-for recovery of the German economy is likely to be weaker or not materialize, depending on the duration of the Iran war. The prospects for construction have deteriorated more significantly than at any time since the start of the Ukraine war in March 2022, said ifo President Fuest.