FRANKFURT – The Iran war is now front and centre in the minds of investors, who have turned overwhelmingly pessimistic about Europe’s largest economy.
Germany’s ZEW thinktank said Tuesday that the March expectations indicator for the coming half-year had “collapsed” to -0.5 points, a dizzying drop from 58.3 last month and far below the market expectation of 39.2.
The measure hit 59.6 in January, the best showing since July 2021, but now it has fallen to its lowest mark since April of last year, when it plummeted on US tariff threats.
The DAX 40 index of German blue-chip stocks was trading around 23,600 points in Frankfurt Tuesday morning, down more than 1,500 since its close the day before the US and Israel begin their military strikes on Iran.
The ZEW said its current conditions indicator for Germany improved to -62.9 points. The measure was expected to hold at -65.9.
The thinktank’s measure for the Eurozone’s outlook skidded to -8.5 points from 39.4 in February.
ZEW president Achim Wambach noted that the escalation in the Middle East has spiked energy prices and added inflationary pressure. “This heightens the risk for the German economy that the emerging trend of economic recovery will slow down. How strong these effects will turn out depends on the intensity and the duration of the conflict. The financial market experts are sceptical that a quick resolution of the conflict will take place.”
The Frankfurt-based pollster Sentix said last week that its headline index for Germany slid to -12.1 points in February, down from -6.9 points in January, the best result since August. “The picture is mixed,” the report said. “The assessment of the current situation actually improved, rising for the third time in a row to -25.0 points. This is the highest level for the situation index since July 2025, although it would be premature to celebrate: the economic situation is still rated as ‘poor’.”
And the waiting continues...
So far, the word out of European capitals is that they will sit this war out. With only a trickle of ships running the gauntlet in the Strait of Hormuz – reports say Iran has allowed a few to pass – oil prices remain elevated to the point that economic growth is expected to suffer. The new hostilities in the region spurred two other German economics institutes, Ifo and IFW, to last week cut their forecasts for this year’s German GDP growth to 0.8% from their winter projections of 1.0%.
And higher oil prices usually wind up hitting consumer prices. Eurozone inflation already surprised to the upside last month, which has increased worries about economic growth in the currency union.
German business confidence improved last month, but that was before the war began.
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- ZEW: the “indicator has collapsed”
- Respondents “sceptical” of quick end to conflict
By Eric Culp, European Editor
LiveSquawk News
@eculp.bsky.social
@EricCulpLS
17 March 2026 | 10:55 GMT
FRANKFURT – The Iran war is now front and centre in the minds of investors, who have turned overwhelmingly pessimistic about Europe’s largest economy.
Germany’s ZEW thinktank said Tuesday that the March expectations indicator for the coming half-year had “collapsed” to -0.5 points, a dizzying drop from 58.3 last month and far below the market expectation of 39.2.
The measure hit 59.6 in January, the best showing since July 2021, but now it has fallen to its lowest mark since April of last year, when it plummeted on US tariff threats.
The DAX 40 index of German blue-chip stocks was trading around 23,600 points in Frankfurt Tuesday morning, down more than 1,500 since its close the day before the US and Israel begin their military strikes on Iran.
The ZEW said its current conditions indicator for Germany improved to -62.9 points. The measure was expected to hold at -65.9.
The thinktank’s measure for the Eurozone’s outlook skidded to -8.5 points from 39.4 in February.
ZEW president Achim Wambach noted that the escalation in the Middle East has spiked energy prices and added inflationary pressure. “This heightens the risk for the German economy that the emerging trend of economic recovery will slow down. How strong these effects will turn out depends on the intensity and the duration of the conflict. The financial market experts are sceptical that a quick resolution of the conflict will take place.”
The Frankfurt-based pollster Sentix said last week that its headline index for Germany slid to -12.1 points in February, down from -6.9 points in January, the best result since August. “The picture is mixed,” the report said. “The assessment of the current situation actually improved, rising for the third time in a row to -25.0 points. This is the highest level for the situation index since July 2025, although it would be premature to celebrate: the economic situation is still rated as ‘poor’.”
And the waiting continues...
So far, the word out of European capitals is that they will sit this war out. With only a trickle of ships running the gauntlet in the Strait of Hormuz – reports say Iran has allowed a few to pass – oil prices remain elevated to the point that economic growth is expected to suffer. The new hostilities in the region spurred two other German economics institutes, Ifo and IFW, to last week cut their forecasts for this year’s German GDP growth to 0.8% from their winter projections of 1.0%.
And higher oil prices usually wind up hitting consumer prices. Eurozone inflation already surprised to the upside last month, which has increased worries about economic growth in the currency union.
German business confidence improved last month, but that was before the war began.
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