The Bundesbank, the German central bank, predicts that the war in Iran will cause inflation in Germany to rise to 3% in the coming months and that further developments will depend on the duration of the conflict.
In the March economic bulletin, published this Thursday, 26th, the Bundesbank assures that “the inflation rate will rise significantly in the coming months”.
Bundesbank economists consider that the inflation outlook is, at the moment, particularly insecure.
Inflation, they highlight, will be influenced in the coming months mainly by the conflict in the Middle East and the fluctuations it causes in energy prices, especially oil and gas.
The sharp increase in oil prices increases fuel prices in the short term, especially, “consequently, the inflation rate is likely to rise significantly to reach 3% in the near future”, calculates the Bundesbank.
If the Strait of Hormuz remains closed for a long time and the energy supply is reduced, the inflation rate could rise significantly for a longer period of time, warns the financial entity.
The German economy will stagnate in the first quarter because industry will benefit to a limited extent from the growth in world trade due to its weak competitive position, it indicates.
Furthermore, the Bundesbank estimates that Germany’s budget increase for investments in infrastructure and defense will provide a boost throughout the year.
Of the high new national orders in the fourth quarter of 2025 for the construction of vehicles and weapons and ammunition, the Bundesbank points out that it will be time before they increase production significantly.
Meanwhile, the war in the Middle East will weigh on families and businesses, mainly due to higher energy prices and, if the conflict continues into the second quarter, it will increase the headwind for the German economy due to increased uncertainty and the weakening of the world economy, he concludes.
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