Torsten Schmidt, the chief economist at the RWI Leibniz Institute for Economic Research, issued a warning that a protracted war with Iran-lasting longer than four weeks-could push German inflation temporarily to about six percent this year. The spike would be driven by higher oil prices and would stall economic growth, potentially sending Germany into its fourth consecutive year of recession.
Schmidt’s analysis also points to real supply shortages if the conflict continues and Iranian forces keep targeting oil and gas facilities in Gulf nations. In that case, he estimates that oil prices could rise to as much as $150 per barrel.
If the hostilities end by the month’s close, the inflationary impact would be milder. The forecast is for a summer inflation rate around three percent and an annual average of 2.6 percent. However, fuel prices are expected to remain high, with gasoline and diesel staying near two euros per litre for the foreseeable future.
The economist expresses particular concern over gas supplies. With storage capacity only about 20 percent full, there is a risk that Germany will not be able to recharge reserves before winter-especially if the war drags on. High market prices give traders little incentive to store gas, leaving the country vulnerable. Schmidt advocated for the creation of a strategic gas reserve, analogous to an oil reserve, to mitigate this risk.
