Germany’s investor confidence collapsed in March as escalating Middle East conflict drove energy prices higher and revived inflation fears.
The ZEW Indicator of Economic Sentiment plunged from 58.3 in February to -0.5-far below the expected 39-marking a dramatic reversal after early-year optimism.
"The ZEW Indicator has collapsed," said ZEW President Professor Achim Wambach. "The escalation in the Middle East is driving up energy prices and increasing inflationary pressure. This heightens the risk that Germany’s nascent economic recovery will lose momentum."
Energy-intensive industries like steel, cement, and chemicals face the greatest exposure. Around 80% of the 178 surveyed financial experts expect rising inflation across Germany and the eurozone.
The broader eurozone ZEW index also sank into negative territory, dropping to -8.5 from 39.4-the lowest level in nearly a year. Analysts at Oxford Economics warned the full economic impact will likely emerge in Q2 through reduced household spending.
Still, they noted the shock should be milder than the 2022 Ukraine crisis.