Germany isn't fighting the Iran war. But it's paying for it. Chancellor Friedrich Merz has already warned the US and Israel against an "endless war", one that risks lasting economic damage and a migration crisis that Europe is not prepared for. His concern is well-founded. Since the strikes began on 28 February, the costs have been arriving steadily on German doorsteps.
Petrol and diesel crossed the €2 per litre threshold in Germany for the first time since 2022. According to ADAC, the national average as of 17 March stands at €2.04 per litre for unleaded (Super E10) and €2.16 per litre for diesel, with prices in states like Brandenburg and Hessen running even higher.
Germany is being hit harder than most neighbours. Diesel prices are up 44% compared to the week before the war, against an EU-wide average of 29%. Petrol is up 29%, versus 16% across the bloc. The Monopolies Commission flagged this directly, suggesting German fuel companies have been passing on wholesale costs more aggressively than their European counterparts.
Less visible but more significant for households. According to Verivox, new gas contracts have risen by 1.7 cents per kilowatt-hour since the war began, from 8.2 to 9.9 cents/kWh, a 21% increase. European wholesale gas prices are now 68% above pre-war levels.
Existing customers are protected for now. But Verivox energy expert Thorsten Storck has a clear message: check your contract and lock in current rates for the coming heating season. Many providers allow switching up to 12 months in advance. European wholesale gas prices, the benchmark that determines what Germans pay, have already risen 57% since the war began, from around €32 to €50 per MWh. If the conflict doesn't resolve, prices could climb further to €60 per MWh.
Germany's gas storage sits at just 22% capacity. While Economics Minister Reiche has said supply is secure for the remainder of this winter, storage operators have already warned that refilling ahead of next winter will be an "extraordinarily large challenge"
Hapag-Lloyd, Germany's own shipping giant, introduced a war risk surcharge of $1,500 per standard container and $3,500 for refrigerated units on all Gulf cargo from 2 March, citing the "dynamic situation around the Strait of Hormuz." For ordinary Germans, this is not an abstract logistics problem. Higher freight costs feed directly into the price of imported goods, from electronics and clothing to food products, as businesses pass on the additional costs to consumers. The longer Gulf routes remain disrupted, the more of those increases will show up on shop shelves.
Some products will be hit first. Dates, pistachios, nuts, and certain spices imported directly from the region are expected to see the sharpest price jumps, as they can't easily be sourced elsewhere.
The broader risk is to Germany's autumn harvest. March is when German farmers begin fieldwork and purchase fertiliser, and the Gulf region supplies a significant share of the world's nitrogen and urea-based fertilisers that determine crop yields. Kiel Institute economist Hendrik Mahlkow warned that if farmers reduce fertiliser use in response to the crisis, crop yields could fall and food prices could rise noticeably by late summer.
Germany's food industry body BVE has separately flagged rising gas costs as a direct threat to domestic food and beverage production, processes like baking and drying rely heavily on natural gas. For now, consumer protection authorities say no shortage of food or product categories is expected in Germany, and there is no need to stockpile.
The Iran war has thrown German air travel into chaos, with dozens of routes cancelled, Gulf hubs effectively shut, and long-haul fares surging overnight. Lufthansa has suspended flights to Dubai, Abu Dhabi, Amman, and Erbil until at least 28 March, with Tehran cancelled until 30 April, citing "persistently high airspace risk levels and unpredictable escalation scenarios." The suspension covers the full Lufthansa Group, including SWISS, Austrian Airlines, and Eurowings.
The cost impact on German travellers flows directly from the fuel shock. Jet fuel prices, which stood at around $85–90 per barrel before the attacks on Iran, soared to between $150 and $200 a barrel. Airlines are being forced to reroute around closed Gulf airspace, adding hours and fuel burn to every long-haul flight. Lufthansa CEO Carsten Spohr said "the war in the Middle East proves once again how exposed air traffic is and how vulnerable it remains." German carriers were already rerouting around Russian airspace since 2022. This is now a second forced detour stacked on top of the first.
If the war triggers mass displacement, Germany is likely to bear the brunt. A study by Rockwool Foundation Berlin found that Germany is the top destination named by Iranians wishing to emigrate, and a significant share of Iranian refugees globally were already living here by end-2025.
Rockwool Foundation Berlin Director Christian Dustmann noted that more distant destinations such as Canada, Australia, and the United States are harder to reach in a crisis. "It is therefore likely that Europe, and Germany in particular, will become the primary destination of possible refugee movements should displacement as a result of the war increase," he said.
Law enforcement authorities have warned of risks to internal security and urged a coordinated response Chancellor Merz has explicitly warned against a prolonged war creating "a Syrian scenario" in Europe. Domestically, security authorities have raised alert levels for Jewish, Israeli, and American institutions across Germany, warning of internal security risks linked to the conflict.
The ifo Institute's Spring 2026 forecast sets out the stakes plainly. Before the war, Germany's GDP was forecast to grow 1.0% this year. That has already been revised down to 0.8% in the best-case scenario, and could fall as low as 0.6% if the conflict escalates further.
The RWI-Leibniz Institute goes further. Economist Torsten Schmidt has warned inflation could temporarily hit 6%, with oil potentially reaching $150 per barrel if Iran continues targeting Gulf energy infrastructure. DIW's Fratzscher warned that rising prices "hit people with low incomes hardest, as they spend a disproportionately large share of their income on food and energy."
Germany has ruled out military involvement. On the economic front, the response has been concrete. Germany has agreed to release around 2.5 million tonnes of oil from its strategic reserves as part of a globally coordinated IEA effort. The IEA's emergency release of 400 million barrels is the largest in its history, backed unanimously by all 32 member countries. Economy Minister Reiche stated: "The energy supply in Germany is secure, but we are seeing considerable price fluctuations and volatility on the markets."
Alongside the reserve release, Germany is adopting a new pricing model for petrol stations under which fuel prices can only be set once per day, increases during the course of the day will not be permitted. The Monopolies Commission backed the model, saying it protects consumers from abrupt price jumps without undermining competition. However, ADAC warned that stations may simply front-load higher prices from the start of the day as a result. Reiche also confirmed the government will introduce more stringent antitrust regulation of the fuel sector to prevent profiteering.
Every additional week of war costs Germany - at the pump, in energy contracts, on supply chains, and in investor confidence. Chancellor Merz has made Berlin's position plain: Germany was not consulted, would have advised against the strikes, and sees no convincing exit strategy from Washington. Berlin's next move is diplomatic. Chancellor Merz has signalled Germany's readiness to contribute to post-war freedom of navigation in the Strait of Hormuz. For now, the priority is simple: end the war before the economic damage becomes irreversible.
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