Germany cuts GDP forecast in half on the Iran war

Germany’s economy ministry sharply downgraded growth forecasts, cutting 2026 GDP to 0.5% (from 1.0%) and 2027 to 0.9% (from 1.3%), while projecting inflation of 2.7% in 2026 and 2.8% in 2027. The Bundesbank warned the worst economic effects from the Middle East war are likely still ahead, flagging stagflation risks and elevated inflation. Markets face supply-driven oil risks — the article cites about 13 million barrels effectively missing from global markets and concerns Europe could run low on jet fuel — which boosts upside pressure on energy prices and complicates policy responses. Germany’s fiscal relief for fuel (€1.6bn) and the prospect of further measures aim to cushion consumers but may have limited impact. The euro was slightly weaker (around 1.1735 EURUSD) on the news. Overall, the piece signals a negative growth/inflation shock for European assets and energy markets, weighing on the Germany 40 index and euro, while supporting oil prices.