Summary:
German investor confidence fell more than expected in March, the worst since February 2022.
The ZEW indicator has fallen to -0.5 points due to the ongoing conflict and increasing pressure in the Middle East, which is likely to slow the pace of economic recovery.
Economists say disruptions to oil and gas supplies have turned Germany from a "ray of hope" back to a "cause for concern."
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02 March 2026, Hesse, Frankfurt/Main: Traders sit at their desks in the trading room at the stock exchange. The attacks in the Middle East are causing shifts on the financial market. Photo: Andreas Arnold/dpa (Photo by Andreas Arnold/picture alliance via Getty Images) |
Berlin: German investor sentiment fell more than expected in March, the biggest monthly decline since the Russian invasion of Ukraine in February 2022. According to economists, rising tensions in the Middle East and rising pressure on prices have dampened hopes for the economy.
The ZEW economic research institute said on Tuesday that its economic sentiment index fell to -0.5 points in March, its lowest level since April 2025.
Conflict in the Middle East Derails German Investor Optimism
Commenting on the situation, ZEW President Professor Achim Wembach said that "the ZEW indicator has completely collapsed." He added that rising inflationary pressures were increasing the risk of a slowdown in Germany's nascent economic recovery. He added that the severity of these effects would depend on the intensity and duration of the ongoing conflict in the Middle East.
Economists believe there is no quick resolution to the conflict. "This shows once again that this war, which has been going on for two weeks now, is leaving deep wounds," said Erlrich Wurttemberg, an economist at German bank Helaba.
It should be noted that the survey was conducted between March 9 and March 16. Earlier, on February 28, the United States and Israel attacked Iran after weeks of military buildup. This development has caused a stir in global markets.
Experts say the Iran war has hit investors hard. "The Iran war has dealt a deep blow to investors," said renowned economist Alexander Krueger. "The financial package and the orders filled have now faded into the background." He added that "investor sentiment in the current situation depends on the question of when oil and gas supplies will be restored without risk." According to him, "the situation is that the German economy has turned from a ray of hope to a cause for concern."
In light of this growing uncertainty, Deutsche Bank has cut its 2026 growth forecast to just 1.0% from 1.5% in December. However, “we do not expect the German economic recovery to come to a complete halt,” said Deutsche Bank Research economist Mark Schattenberg.
Interestingly, while investor sentiment has declined sharply, the current economic situation index has improved from negative 65.9 to negative 62.9 points. This means that although concerns about the future have increased, current conditions have improved somewhat.
“Looking ahead, rising energy prices as a result of the ongoing conflict in the Middle East will continue to weigh on sentiment for some time,” warned Ankita Amajuri, Europe economist at Pantheon Macroeconomics.