Germany’s closely watched investor confidence gauge just did something nobody on Wall Street or Frankfurt’s trading floors predicted: it went up.
The ZEW Indicator of Economic Sentiment climbed to -10.2 in May from -17.2 in April, defying consensus forecasts of -19. That’s still negative territory, meaning pessimists outnumber optimists. But the direction matters more than the absolute number right now, and the direction is unmistakably better.
The catalyst is straightforward. Investors are betting that the Iran war, which began around February 28, could reach a resolution sooner than the market had priced in. For an economy that runs on cheap energy and exports, that bet carries enormous weight.
Energy costs are the real story
Brent crude prices have jumped roughly 30% since the conflict began, climbing to a projected average of $83 per barrel from around $64 before hostilities broke out. European TTF natural gas prices have hit approximately $44 per megawatt-hour. Germany’s industrial energy costs are expected to rise 20-30% on an annual basis.
