Germany likely saw modest economic expansion in the first quarter, driven by a recovery in goods exports and industrial revenue. The Bundesbank reports that while services provided a positive lift, private consumption weakened. Economists surveyed by Bloomberg expect a marginal gain of 0.2% when official GDP data arrives on April 30.

Geopolitical instability now threatens this fragile recovery. The war in Iran and a blockade of the Strait of Hormuz complicate a domestic environment already strained by US tariffs and Chinese competition. To combat rising costs, the government introduced €1.6 billion in fuel-price relief to shield the economy from energy shocks.

Chancellor Friedrich Merz has signaled that further measures are ready if Middle East tensions escalate. Business sentiment is declining while inflation expectations climb, creating a volatile environment for investors. The central bank warns that war-related disruptions will weigh more heavily on the economy in the second quarter.