Rising oil prices set off by the conflict in Iran could sharply slow Germany’s economic growth. A simulation conducted by the Institute for German Economic Research (IW) and released on Thursday estimated that if the price of crude rises to $150 per barrel, Germany’s gross domestic product (GDP) would fall by 0.5 percent in 2026 and by 1.3 percent in 2027-an overall loss of more than €80 billion over the two years.
Even a smaller increase would have noticeable effects: with oil at $100 a barrel, the GDP would fall by 0.3 percent in 2026 and 0.6 percent in 2027, translating to roughly €40 billion in damage across those years. Inflation would also be pushed upward. At $100 a barrel, consumer prices would rise by about 0.8 percent in 2026 and 1.0 percent in 2027; at $150 a barrel the increases would be about 1.6 percent in 2026 and 1.9 percent in 2027. Higher energy costs raise the prices of transport, heating, production and many intermediate goods, a ripple effect that drives consumer prices higher along the entire supply chain.
Although Iran itself plays a relatively minor role in Germany’s external trade, the economy faces indirect risks. Rising energy prices sit alongside disruptions in international financial markets, interruptions in global supply chains, and a growing fragmentation of the global economy. “Large-scale disturbances comparable to the oil crises of the 1970s are unlikely at present” said Galina Kolev‑Schaefer of the IW. “Nonetheless, each increase in energy prices and every disruption in global trade hits the export‑oriented German economy’s competitiveness quite sharply”.
The severity of the consequences will depend on how rapidly the conflict spreads, its duration, and how much the Strait of Hormuz oil transport route is affected.
To estimate the economic impact of an oil‑price shock on Germany, the IW ran simulations with Oxford Economics’ Global Economic Model. The baseline scenario assumed a Brent price of US $60 per barrel in 2026 and 2027, while two alternative scenarios set the price at $100 and $150 per barrel from March 2026 onward. These models captured only the macro‑economic adjustments to the higher oil price; indirect effects such as increased geopolitical uncertainty or higher gas prices were only reflected indirectly.
