Video | Energy prices soar, putting pressure on Germany's industrial and consumer sectors

How does the Israel–U.S. conflict spill over into Germany’s economy?

As the Israel–U.S. conflict continues to intensify, its spillover effects are spreading from Germany’s energy market to industrial production, supply chains, and consumer sectors, further increasing the downward pressure on the German economy.

An authoritative German economic research institution pointed out that soaring energy prices have become the core variable of current economic risks. Some German industries that rely on imports of energy and raw materials have already begun to feel the dual pressures of tightening supply and rising costs.

Economist Walther Schoyze from the Ifo Institute for Economic Research:
“The economic outlook for Germany and even the global economy largely depends on the course of the conflict, which means that in the medium term, we will face shortages of oil and natural gas supplies. This will lead to long-term high energy prices, which will undoubtedly put pressure on both the German and global economies.”

Analysts believe that as the Israel–U.S. conflict persists, its impact is further transmitting from the energy sector to the industrial chain and beginning to trigger chain reactions in the global production system. Meanwhile, this shock is also spreading to residents’ income and consumption sectors.

Holtmoeller, Deputy Director of the Halle Institute for Economic Research:
“Germany is facing a severe energy price shock, with oil prices continuing to rise, which means that overall income in Germany is declining, and people can feel this at the gas station. As a result, less money is available for other purposes, and consumption will also be affected. Overall, this will weaken Germany’s economic development.”

The rise in uncertainty has also undermined confidence among German businesses and markets, making the outlook for economic recovery more complicated. As a result, several German economic research institutions have already downgraded their forecasts for future German economic growth.