Iran war pushes German wholesale price inflation to three-year high
Impact of Iran Conflict on German Inflation and Economy
By Rene Wagner and Matthias Williams
Wholesale Price Surge in April
BERLIN, May 13 (Reuters) - German wholesale prices climbed to a three-year high of 6.3% in April as the Iran war pushed up the prices of energy and raw materials, official data showed on Wednesday, compared to just 1.2% in February before the outbreak of hostilities.
Inflation and Economic Policy Challenges
Rising inflation due to unprecedented disruption in global energy markets has raised the prospect of interest rate hikes and is another headache for Chancellor Friedrich Merz's government as it struggles to gee up economic growth.
Statistics Office Statement
"The decisive factor for the price increase in April 2026 was the hostilities in Iran and the Middle East, which led to a rise in wholesale prices, particularly for energy products and raw materials," the federal statistics office said.
Energy and Raw Material Price Increases
Petroleum products rose by 37.3% compared to April 2025. Global prices have spiked due to the virtual closure of the Strait of Hormuz, through which about a fifth of the world's oil and liquefied natural gas (LNG) supply normally passes.
Financial Market Reactions
German government bond yields also hovered around multiyear highs on Wednesday as markets expected the European Central Bank to raise rates by 75 basis points by year-end.
Inflation Outlook and Government Response
German headline inflation accelerated to 2.9% in April.
Companies are likely to pass on higher energy costs to customers, at least in part, said Felix Schmidt, an economist at Berenberg.
"This will increase inflationary pressure, and the inflation rate is expected to jump above the 3% mark in May. We are currently forecasting an inflation rate of around 3.2%."
Political and Social Measures
Battling to stave off the rise of the far-right Alternative for Germany (AfD) and trying to keep a lid on squabbles within his coalition, Merz's government has sought to cushion Germans from rising prices, but this has also been a bumpy process.
The government introduced a measure for employers to provide workers a voluntary tax-free relief bonus of up to 1,000 euros ($1,177), but the proposal ran into regional opposition from states.
Reporting Credits
(Reporting by Rene Wagner, Matthias Williams, Daria Bogdanska; writing by Matthias Williams; Editing by Linda Pasquini and Clarence Fernandez)
