Finance
German Economy Likely Grew in Q1 but Iran War Weighs on Outlook, Bundesbank Says
Published by Global Banking & Finance Review®
Posted on April 22, 2026
2 min readLast updated: April 22, 2026
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Economy edged ahead modestly in Q1 thanks to resilient industry, services and exports, but rising energy prices and deepening uncertainty from the Iran war cloud growth prospects for Q2.
Germany’s Economy Rises in Q1 2024 but Faces Mounting Risks from Iran War
German Economic Performance and Challenges in Early 2024
Q1 2024 Growth and Contributing Factors
FRANKFURT, April 22 (Reuters) - The German economy grew at a modest pace in the first quarter on healthy industrial and services output but higher energy prices and the uncertainty over the Iran war will likely weigh on the current quarter, the Bundesbank said on Wednesday.
Europe's largest economy has been broadly stagnant for three years and the Iran war is now jeopardizing government hopes that a massive investment in infrastructure and defence will finally kickstart growth.
Impact of the Iran War on Consumer Confidence
Although the war already hit consumer confidence at the end of the first quarter, the overall performance of the economy was largely unaffected due to strong business-related services, rising industrial sales and healthy exports, the Bundesbank said in a monthly report.
Emerging Economic Headwinds
But headwinds are intensifying, the bank added.
"Looking ahead to the second quarter, only a slight expansion is anticipated, at best," it said.
Fiscal Policy and Middle East Conflict Effects
"Increasingly positive impulses from the more expansionary fiscal policy are expected to take effect," the central bank said. "On the other hand, the effects of the war in the Middle East are expected to burden the German economy more broadly and noticeably."
Specific Risks and Outlook
Energy Prices and Supply Chain Disruptions
The Iran war has increased energy prices, created supply chain problems, raised uncertainty, lifted market-based interest rates, and worsened the export outlook, the bank said.
Private Consumption and Export Expectations
Aggravating problems, private consumption was already weakening before the war, then took a clear hit in March as higher fuel prices lowered households' purchasing power.
"Export and business expectations point to a more subdued outlook," the Bundesbank said. "This is likely due not only to the burdens of higher energy costs and supply chain disruptions, but also to concerns about weaker global demand in the wake of the war in the Middle East."
(Reporting by Balazs KoranyiEditing by Alexandra Hudson)
Key Takeaways
- •German GDP likely saw modest growth in Q1, supported by industrial output, services and exports, says Bundesbank (bundeswirtschaftsministerium.de).
- •The Iran war is causing energy price shocks, supply chain disruptions and weaker confidence, weighing on consumer spending and export outlook (bundesbank.de).
- •Experts have sharply cut Germany’s 2026 growth forecasts to around 0.6%, highlighting risk of stagflation despite gradual uptick from fiscal stimulus (apnews.com)
References
Frequently Asked Questions about German economy likely grew in Q1 but Iran war weighs on outlook, Bundesbank says
1Did the German economy grow in the first quarter of 2024?
Yes, the Bundesbank reported that the German economy grew modestly in Q1 2024 thanks to healthy industrial and services output.
2How is the Iran war affecting the German economy?
The Iran war is raising energy prices, creating supply chain issues, and increasing uncertainty, which is expected to weigh on German economic growth in the current quarter.
3What are the main risks to Germany’s economic outlook?
Rising energy costs, supply chain disruptions, weaker global demand, and falling private consumption due to the Iran war are the main risks.
4How did consumer confidence in Germany change following the Iran war?
Consumer confidence was hit at the end of Q1, and private consumption weakened further in March due to higher fuel prices.
5What does the Bundesbank expect for Germany’s economic performance in Q2?
The Bundesbank anticipates only slight expansion at best in Q2, with positive fiscal policy but increasing challenges from the Iran war.
