The conflict in Iran is weighing heavily on German SMEs. In March the business climate index for small and medium‑sized enterprises fell 3.6 points to -18.2, according to the KfW‑Ifo Mid‑Market Barometer. This puts the sentiment well below the zero line that represents the long‑term average.
The sharp decline is largely driven by the outlook for the next six months, which dropped 7.6 points to -19.2. SMEs assessed their current economic situation only slightly better than in February. The KfW calculates the business‑climate index from the Ifo business‑survey, split by company size and main economic sectors.
“The uncertainty in the business community is great. As long as the war in Iran continues, it will remain so. Germany’s economic upswing will be slower and weaker than expected” said Dirk Schumacher, chief economist at KfW.
The drop was seen across all sectors in March, but the manufacturing zone was hit hardest. In contrast, the construction sector remained relatively resilient, with only a minor decline. Larger companies experienced an even sharper fall in business sentiment-4.7 points to -21.1. All sectors were affected here as well.
The data also show that price hikes for oil and gas, triggered by the Middle‑East conflict, are pushing firms to anticipate much higher future sales prices. This trend is evident among both SMEs and large firms, reminiscent of the spike seen during the COVID‑19 pandemic in 2020/21. However, international supply chains are still relatively intact today and the conflict remains regionally confined. In a worst‑case scenario, a sudden surge in demand for scarce goods could create a self‑fulfilling prophecy, pushing prices to even higher levels.