Germany’s Economy Ministry has slashed its 2026 GDP growth forecast to 0.5%, down from a prior estimate of 1%. The culprit is the ongoing Iran war, which has sent energy prices sharply higher and rattled business confidence across Europe’s largest economy.
Economy Minister Katherina Reiche put it plainly: the upheaval in the Middle East has set Germany back significantly. The country’s 2027 outlook has also been trimmed, falling to 0.9% from an earlier projection of 1.3%.
Why Germany is hurting more than most
The closure of the Strait of Hormuz in early March 2026 was the inflection point. That single chokepoint handles a substantial share of global liquefied natural gas shipments, and its disruption sent TTF gas prices, Europe’s benchmark, toward €60 per megawatt-hour.
The ifo Institute estimates the energy shock alone could shave up to 0.8 percentage points off German growth if the conflict continues to escalate. In an economy already forecast to grow at just 0.5%, that’s the difference between a weak recovery and a contraction.
