German Economic Institute released a report warning that Germany’s economy could face a staggering hit of €80 billion over the next two years if the conflict with Iran continues to drive oil prices toward $150 per barrel.
The report highlights that while Germany has reduced direct trade with Iran, its industrial core remains critically exposed to global energy price shocks and the effective closure of the Strait of Hormuz.
The €80 Billion “Worst-Case” Scenario
The economic impact is tiered based on the duration of the conflict and the peak price of Brent crude.
| Oil Price Scenario | Projected GDP Loss (2026-27) | Economic Impact |
| $100 per barrel | 0.3% – 0.6% | Approximately €40 billion loss in output. |
| $150 per barrel | 0.5% – 1.3% | Exceeds €80 billion; likely triggers a deep recession. |
- Manufacturing Drag: High energy costs are hitting Germany’s gas-intensive chemical and automotive sectors, further stalling a recovery that was already “tepid” before the war.
- Inflation Spike: Analysts warn that sustained $100+ oil could add up to 2 percentage points to European inflation, eroding consumer purchasing power across the eurozone.
Diplomatic Pressure from Berlin
Faced with these projections, German Chancellor Friedrich Merz met with President Donald Trump at the White House on Tuesday, March 3.
- The Entreaty: Merz urged the U.S. and Israel to bring the campaign to a “swift conclusion,” explicitly citing the damage to the German economy caused by the spike in oil and natural gas prices.
- The Gas Crisis: The conflict has also halted LNG exports from Qatar (following a drone strike on the Ras Laffan plant), leaving Germany’s gas storage refill plans for the 2026 winter in jeopardy.
- Trump’s Response: President Trump downplayed the price surge, suggesting that once the “elimination of leadership” in Iran is complete, oil prices will drop “lower than even before.”
Broader European Fallout
Germany’s struggles are a bellwether for the rest of the eurozone, which remains the “most exposed major economy” to Middle Eastern energy spillovers.
- Stock Market Rout: The DAX 40 fell nearly 3.5% on March 3, reflecting investor fears that a prolonged war will sabotage the continent’s fledgling economic revival.
- Tourism & Logistics: German tour operators (including Alltours and Dertour) have cancelled all trips to the UAE, Oman, and Qatar until at least March 7, as airspace closures and war-risk insurance premiums paralyze the region.
The Energy Security Pivot
Economic institutes are using this crisis to argue that Germany must accelerate its low-carbon transition. They contend that as long as German industry is “renting” its energy from volatile global fossil fuel markets, its economic sovereignty will remain at risk from external geopolitical shocks.
