A new study released by the Ifo Institute indicates that the price increases resulting from the Middle East conflict are significantly impacting low-income households in Germany far more acutely than affluent ones. According to Ifo researcher Tiphaine Wibault, “We see that poorer households are less able to adapt to a price shock that originates thousands of kilometers away, resulting in greater losses of purchasing power.”
The analysis shows that the crisis in the Middle East is placing a substantial financial burden on German households. The total impact is estimated at around €16.8 billion in increased cost for consumer spending. The disparities are sharp: households in the lowest income decile stand to lose an average of 2.87 percent of their disposable income, while the wealthiest households suffer only a loss of 0.65 percent. The average loss across all households is calculated at 1.15 percent.
Ifo researcher Andreas Peichl explains that since there is no European price cap mechanism, such as the one used during the 2022 energy crisis, the full weight of this shock lands directly on households-particularly those with lower incomes.
The study also points to the severe impact on older individuals. Pension couples and single seniors are losing between 1.45 and 1.53 percent of their income due to the price shock. This heightened vulnerability stems from the fact that they do not have wage income to act as a buffer and must allocate a disproportionately high percentage of their budget towards heating and energy costs.
