Germany’s economy hit by Middle East energy crunch in World Economy News 24/03/2026 When the US and Israel attacked Iran, the response was not long in coming. Iran is no longer allowing ships to pass through its coastal waters. The Strait of Hormuz, the bottleneck in the Persian Gulf through which 20% of the global oil trade passes every day, is now effectively blocked. After the attack, the price of oil immediately rose sharply. Prices for gasoline and diesel also skyrocketed at German gas stations. Depending on the region, premium gasoline even went as high €2.50 ($2.89) per liter. The average price for diesel is currently just over €2, which is €0.30 higher than before the attack on Iran. There were even more extreme price spikes for natural gas following Iran’s drone attacks on liquefied natural gas (LNG) facilities in Qatar, resulting in a halt to production. Germany does not source LNG directly from Qatar. Its supply chains are diversified, and much of its gas is sourced via Norwegian pipelines. However, the price is ultimately determined by the European wholesale market, which is driven by the balance between international supply and current and expected demand. Increased energy prices not only impact households but also industry, resulting in higher production costs. Energy-intensive sectors are particularly affected, such as chemicals, steel, glass and paper, but the automotive and mechanical engineering industries are feeling the effects as well. Shock for the Merz administration The war in Iran is reminding Germany just how vulnerable highly industrialized economies are in this era of global crisis. And German economists have expressed similar concerns. Veronika Grimm, one of five experts who advise the German government on economic matters, warns of rising inflation and additional investment uncertainty. “We must prepare ourselves for a prolonged period of increased uncertainty,” the professor told the Redaktionsnetzwerk Deutschland (RND). Alarm bells are ringing in German policy circles. For 10 months now, a coalition between the conservative Christian Democratic Union (CDU)/Christian Social Union (CSU) and the center-left Social Democratic Party (SPD) has been in power. During his election campaign and upon taking office, Chancellor Friedrich Merz (CDU) promised that reviving the German economy would be his top priority. But the upturn has yet to materialize. The small upturn that Germany saw at the beginning of the year could now be undone by the war in Iran. Poison for the economy Energy prices in Germany have risen dramatically since Russia’s invasion of Ukraine. Further price increases, coupled with faltering supply chains and additional global uncertainty, are proving toxic for the German economy. Grimm is calling for Europe’s energy supply to be made more resilient by diversifying supply chains, stocking up reserves, coordinating European purchasing and accelerating the expansion of its own energy supply. Ever since gas supplies from Russia were cut off four years ago, there have been calls for these measures to be implemented. The only problem is that this has been difficult to implement. After an extremely cold winter in Germany, gas storage facilities are almost empty. A brake on transport and aviation In addition to the energy crisis, the war in Iran is causing additional problems, especially for the shipping industry. German shipping companies now have to bypass the Persian Gulf, causing delays in global supply