The war in Iran has severely damaged Germany's economy, and investor confidence has dropped to a level not seen in over three years

The US-Israeli war is undermining the recovery momentum of Europe's largest economy, and German investor confidence has dropped to its lowest point in more than three years.

Analysts warn that the impact of this conflict on the German economy is not limited to raising inflation; businesses' concerns over a long-term shortage of energy supplies are also undermining investment.

Bloomberg reported that a survey released by the European Economic Research Center (ZEW) of a German think tank on Tuesday (April 21st) showed that Germany's economic expectations index for April dropped from -0.5 in March to -17.2, marking the worst performance since 2022 and simultaneously causing a decline in the indicators measuring the current economic situation.

Achim Wambach, the president of ZEW, pointed out that the economic consequences of the war in Iran go far beyond price hikes. Enterprises' concerns over the long-term shortage of energy are dampening investment and weakening the effectiveness of the government's stimulus measures.

Major research institutions in Germany have lowered their economic growth forecast for this year to less than half of what they predicted just a few months ago. After experiencing two consecutive years of contraction, Germany's GDP is expected to increase by only 0.2% in 2025. Public investment in infrastructure and defense has provided some support.

In response to the energy crisis, the German government has introduced a 1.6 billion euro (approximately 2.4 billion Singapore dollars) fuel price reduction measure and has stated that if the situation continues to escalate, it will prepare further response plans. The European Central Bank is expected to keep interest rates unchanged on April 30th to assess the damage caused by the war.