A prolonged conflict in Iran could weigh heavily on the German economy, according to an analysis by the ZEW research center. Rising energy prices linked to tensions in the Middle East risk slowing growth while simultaneously reigniting inflationary pressures.
In the most likely scenario, tensions could persist for several months, maintaining a high level of uncertainty in the markets. This situation would lead to a slowdown in economic activity in Germany, while pushing inflation to around 2,7%.
The risk of a stagflation scenario
Economists warn of a more serious risk in the event of a prolonged or intensified conflict. Germany could then enter a phase of stagflation, combining weak growth and a sharp rise in prices.
Increased uncertainty is already weighing on economic behavior, with investors becoming more cautious and households inclined to limit their spending. A rapid de-escalation would mitigate these effects, but analysts now consider it unlikely.
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