Finance
Energy prices increase from iran war to dampen germany's recovery only slightly, DIW says
Published by Global Banking & Finance Review®
Posted on March 11, 2026
2 min readLast updated: March 11, 2026
Quick Summary
DIW forecasts that higher energy prices from the Iran war and erratic U.S. trade policies will only modestly slow Germany’s economic recovery, with GDP seen rising ~1% in 2026 and modest inflation pressure.
Germany’s Economic Recovery Faces Minor Impact from Energy Price Surge: DIW
DIW Analysis of Germany’s Economic Outlook Amid Global Challenges
Energy Prices and Geopolitical Tensions
BERLIN, March 11 (Reuters) - A rise in energy prices from the war in Iran and the United States' "erratic" trade policies are expected to dampen Germany's economic recovery only slightly this year, Germany economic research institute DIW said on Wednesday.
Growth Projections for Germany
GDP Forecasts
The institute, one of Germany's main economic forecasters, expects the country's gross domestic product to increase by 1% this year and by 1.4% in 2027, after 0.2% growth in 2025.
Factors Supporting Recovery
A recovery was continuing in early 2026 thanks to strong public consumption and a gradual pick-up in government investments – initially in defence and later in infrastructure - the institute said.
Trade Policy and Export Impact
US Tariffs and German Exports
A decision by the U.S. Supreme Court to strike down many of President Donald Trump's tariffs has had no noticeable impact on German exports so far due to Trump's subsequent introduction of a 150-day global 10% levy, the institute said.
Energy Price Surge Compared to Past Crises
Current vs. Previous Energy Crises
Meanwhile, a recent rise in energy prices as a result of an escalating conflict in the Middle East is significantly lower than during the energy crisis of 2022-2023, DIW said.
Inflation and Growth Impact
Assuming that the strongest surge in prices is behind us and oil and gas prices will only rise moderately, those may add 0.4 percentage points to inflation this year and dampen growth by 0.1 to 0.2 points, the institute said.
Overall Economic Outlook
Resilience of German Recovery
"Overall, this will slow down the recovery of the German economy, but it will not stop it," said DIW.
Inflation and Interest Rate Forecasts
It forecast an inflation rate of 2.4% for 2026, and of 2.3% for next year, as it foresees no further interest rate hikes by the European Central Bank.
Reporting Credits
(Reporting by Linda PasquiniEditing by Ludwig Burger)
Key Takeaways
- •DIW expects Germany’s GDP to grow by approximately 1% in 2026 and 1.4% in 2027, following weak 0.2% growth in 2025, supported by strong public consumption and increased defence and infrastructure investment, despite headwinds from energy prices and U.S. trade policy. (diw.de)
- •Rising energy prices due to the Iran war are expected to add around 0.4 percentage points to inflation and shave 0.1–0.2 percentage points off growth—far less than the 2022–2023 energy crisis. (m.economictimes.com)
- •Although a U.S. Supreme Court ruling invalidated many of former President Trump’s tariffs, Germany has seen no discernible boost to exports due to Trump’s replacement of tariffs with a global 10% levy. (lemonde.fr)
References
Frequently Asked Questions about Energy prices increase from Iran war to dampen Germany's recovery only slightly, DIW says
1How will rising energy prices from the Iran war affect Germany's recovery?
DIW expects only a slight dampening of Germany's economic recovery from higher energy prices due to the Iran war, with growth slowing by 0.1 to 0.2 points.
2How significant is the recent energy price rise compared to previous crises?
DIW states the recent rise in energy prices is significantly lower than during the 2022-2023 energy crisis.
3Will US trade policy changes impact German exports?
DIW notes that recent US tariff decisions have had no noticeable impact on German exports so far.
4What are DIW's inflation expectations for Germany?
DIW forecasts an inflation rate of 2.4% for 2026 and 2.3% for next year, expecting no further ECB interest rate hikes.
