Germany is expected to avoid a recession even though rising energy prices caused by the Iran war are putting pressure on the economy, according to the country’s central bank.
The president of the German central bank, Joachim Nagel, said on Thursday that the recent surge in oil prices linked to the conflict in the Middle East will slow economic growth, but it is not likely to push Germany into a full recession.
Speaking at a panel event in Washington during the International Monetary Fund (IMF) spring meetings, Nagel said the German economy would need to experience a much more severe shock before it could slip into recession. He emphasized that although current conditions are challenging, they are not strong enough on their own to trigger a major downturn.
He noted that Germany’s economy had started the year in relatively stable condition, describing the early performance as “respectable.” However, he warned that the ongoing war in the Middle East is now acting as a brake on economic activity, mainly through higher energy costs and increased uncertainty in global markets.
The Iran conflict has led to disruptions in global oil supply routes, pushing energy prices higher worldwide. As a major industrial economy that relies heavily on energy imports, Germany is particularly sensitive to changes in oil and gas prices. Higher energy costs tend to increase production expenses for manufacturers and reduce consumer spending power.
Despite these challenges, Nagel said the overall outlook remains more stable than during previous crises. He suggested that while growth will be weaker than initially expected, a full contraction of the economy is not the most likely scenario at this stage.
However, Germany’s broader economic forecasts have recently been revised downward. According to reports, the German government has significantly reduced its growth expectations for both 2026 and 2027. At the same time, inflation forecasts have been increased, reflecting the pressure from higher energy and import costs.
These revisions highlight growing concerns about the long-term impact of global instability on Europe’s largest economy. Industrial output in Germany has already been under pressure due to weak demand in key export markets and higher production costs.
Economists say that while Germany is not currently heading into recession, its growth path remains fragile. Much will depend on how long energy prices stay elevated and whether global trade conditions improve in the coming months.
Nagel’s comments also reflect a broader effort by European policymakers to reassure markets that the economic system remains stable despite geopolitical tensions. Central banks across the region have been closely monitoring inflation and growth trends as they respond to ongoing global shocks.
For now, Germany’s central bank maintains that the economy is resilient enough to withstand current pressures, even if growth slows in the short term.
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