The morale of entrepreneurs in Germany dropped in March, especially in energy-intensive industries, according to a survey published on Wednesday amid the Middle East war driving up energy costs and disrupting supply chains.
The business climate index of the Ifo institute, closely monitored by businesses, stood at 86.4 points in March, two points lower than the previous month.
“The index reveals that the economic recovery is blocked in the Strait of Hormuz,” summarizes Sebastian Wanke, economist at KfW bank, referring to the strategic maritime passage blockade since the beginning of the war for hydrocarbons.
After two consecutive years of recession, the GDP of the largest European economy slightly grew in 2025, but its industrial and export model has been deeply challenged by the surge in energy prices since the war in Ukraine, Asian competition, and a lag in new technologies.
Berlin is currently counting on a 1.0% GDP growth in 2026, supported by significant public investments.
Mr. Wanke remains confident about the GDP growth in the first quarter of this year. But he warns, “as long as the war in Iran continues, business morale continues to deteriorate, and the economic situation is once again hindered.”
On Tuesday, the German Economy Minister, Katherina Reiche, warned that if the war persists, it could endanger the “fragile and modest recovery” of the economy and lead to fuel shortages in the country by the end of April.
A sustained increase in Brent crude to $150, a worst-case scenario, could cost Germany and its energy-intensive industry 80 billion euros over two years, according to a study by the IW Institute in Cologne.
Specifically, it is the expectations of bosses for the next six months that have deteriorated, pushing down the overall index, while the evaluation of the current situation remains steady.
