The five major German economic research institutes are estimating the impact of the Iran conflict on Germany in different ways.
The Ifo Institute in Munich and the RWI in Essen both find that, based on early modelling, the war in the Middle East could squeeze German GDP growth by almost 0.2 percentage points this year.
The German Institute for Economic Research (DIW) in Berlin, using current forward curves for oil and gas, projects a decline of roughly 0.1 to 0.2 percentage points. With an anticipated growth of about one percent, these negative effects are not large enough to wipe out the moderate rebound Germany has seen.
When it comes to inflation, DIW and RWI expect a rise of 0.4 to 0.5 percentage points this year, while Ifo’s provisional estimate adds 0.2 percentage points. “Given the current reactions in the energy markets, the immediate repercussions for the German economy are not severe, provided the conflict remains limited to a few months” said Stefan Kooths, chief economist at the Institute of World Economy (IfW) in Kiel. “The Iran conflict does not yet warrant significant revisions of economic forecasts”. He described the situation as one of “manageable dampers”.
Oliver Holtemöller of the Halle Institute for Economic Research (IWH) added that, despite the war, the picture of a fragile recovery still holds. He notes that energy supply is not yet the main concern.
Until now, the macro researchers mainly see the Middle‑East conflict as a cost shock. Geraldine Dany‑Knedlik of the DIW said the situation will become critical only if the conflict turns into a genuine oil and transport shock-for instance, if the Strait of Hormuz remains disrupted for an extended period. “If oil and gas prices stay at the current elevated levels only for a few months because the conflict ends quickly, the impact on Germany should be limited” said Timo Wollmershäuser of Ifo.
