German business sentiment hits lowest since 2020 as Iran war weighs
Germany's Ifo business climate index fell to its lowest level since 2020 in April as the Iran war pressures energy costs and uncertainty weighs on Europe's largest economy. The decline signals growing pessimism among manufacturers and service providers.
Germany's Ifo Institute reported that its business climate index fell to 96.1 in April, marking the lowest reading since 2020. Rising energy prices are pushing up production costs and squeezing profit margins across sectors. The index measures the mood among over 9,000 business managers surveyed monthly.
Uncertainty from the war is causing firms to postpone investment decisions. Companies worry about supply chain disruptions and order books are weakening, especially in automotive and chemicals. The manufacturing sector, which accounts for a quarter of German GDP, is particularly vulnerable to renewed energy shocks and reduced export demand.
While unemployment remains stable, hiring appetite has cooled significantly. Businesses are considering returning to shorter working hours to preserve cash. Economists are forecasting negative manufacturing growth for 2026 unless geopolitical tensions ease. The broader eurozone economy faces similar headwinds.
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