German investor morale sinks to three-year low on Iran war fears, ZEW finds

By Miranda Murray

BERLIN, April 21 (Reuters) - ‌German investor morale ​has ​sunk to its lowest level in more than three years in April as businesses start to feel the economic consequences of the ‌Iran war far beyond price increases, the ZEW economic research institute ⁠said on Tuesday.

The institute's morale index fell to minus 17.2 points in April, significantly below the ‌minus 5.0 points expected by ‌analysts polled by Reuters and well down from last month's minus 0.5 points.

It was the lowest reading since December 2022 at minus 23.3.

"Businesses are concerned ​about long-term shortages of energy supply, and this discourages investment and weakens the effect of government stimuli," said ZEW president Achim Wambach.

SEVERE OIL CRISIS REMAINS ⁠THE NIGHTMARE SCENARIO

The spike in oil and gas prices following the start of joint U.S.-Israeli strikes on Iran ​on February 28 has added to the struggles of Europe's largest economy as it tries to regain momentum in the long ​wake of the COVID pandemic.

Fears of a prolonged ‌energy shortage caused by the blockade on the Strait of Hormuz, through which a fifth of the world's oil is usually ⁠shipped, helped lead to the surprisingly sheer drop in the ZEW indicator, said VP Bank economist Thomas Gitzel.

Prospects in the chemical and pharmaceutical industries, as well as steel and ⁠metal producers, have deteriorated particularly strongly in April, according to ZEW.

"A severe oil crisis remains the ​nightmare scenario, despite all hopes for a resolution to the conflict," said Hauck Aufhaeuser Lampe Privatbank economist Alexander Krueger.

"Either way, economic growth this year will fall short of the expectations ‌held at the end of 2025."

The German government is set to halve its 2026 economic growth forecast to 0.5% and ‌raise its inflation projections when it unveils new forecasts on Wednesday, a source told ⁠Reuters last week.

The indicator monitoring current ‌conditions also fell more ​than expected, to minus 73.7 points. Analysts expected a reading of minus 70.0 points.

(Reporting by Miranda Murray, editing by Linda Pasquini and ‌Hugh Lawson)

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