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Iran War Hits Germany’s Economic Mood
The ongoing Iran war has significantly worsened the economic sentiment among German business leaders, as reflected in the ifo Business Climate Index. The index fell to its lowest point since the COVID-19 pandemic, driven by spikes in energy prices and disrupted supply chains. The decline signals heightened uncertainty across sectors including industry, services, trade, and construction [Source 1].
In March and April 2026, the ifo Index dropped sharply, with March figures showing a fall to 86.4 points – a considerable dip from previous levels – and April showing even more pronounced downturns amid sustained geopolitical tensions. The deepening conflict has halted hopes for a near-term economic upturn, according to ifo President Clemens Fuest [Source 1, Source 2, Seed Article].
Sectoral Impact and Rising Energy Costs
All major sectors have reported deteriorating outlooks. The chemical industry climate index plunged from -16.7 points in February to -25.0 points in March, raising concerns about job cuts. Tourism and logistics sectors face particularly grim prospects, suffering from disruptions and cost pressures. The construction sector’s outlook has deteriorated markedly, reaching lows not seen since the onset of the Ukraine war in early 2022. Agriculture has also felt the impact, partly due to fertilizer supply constraints stemming from the war [Source 3, Source 6, Source 8].
Energy market disruptions have contributed heavily to this malaise. The Iran conflict has led to blockades in the Strait of Hormuz and the halt of LNG exports from Qatar, pushing energy prices higher. These increases affect manufacturing costs and broader inflationary pressures, placing German companies under substantial strain. Around 90% of German industrial firms report negative effects on their business operations as a direct consequence of the conflict and energy price surges [Source 7, Source 6].
Implications for Expats, Foreign Workers, and International Students
Expats and foreign professionals living in Germany should be aware that the worsening business climate may affect job security, particularly in manufacturing, chemical, and construction sectors. Companies may slow hiring or restructure in response to economic uncertainty. Rising energy prices will also increase living costs, impacting household budgets for heating and utilities.
International students might face indirect consequences if their studies rely on part-time work or internships within affected industries. Additionally, sectors like tourism and logistics, where many expats are employed, are seeing reduced activity, which could limit employment opportunities.
Those residing in Germany should monitor company communications regarding potential economic adjustments and budget accordingly for higher energy and living expenses. Staying informed about the evolving geopolitical situation and consulting employer or university advisories is advisable [Seed Article, Source 6, Source 7].
