Germany’s Ifo Business Climate Index dropped to 86.4 in March 2026, the weakest reading since February 2025, as the escalating Middle East conflict dampens economic sentiment. The index compared with market forecasts of 86.1 and marked a sharp decline from February’s revised 88.4. The deterioration was driven by a steep drop in future expectations, which plunged to 86.0 from 90.2, as the war’s impact is exacerbating risks for Germany’s already shaky recovery. Meanwhile, the assessment of current conditions remained flat at 86.7. Sector-wise, sentiment weakened sharply among manufacturers (-14.3 vs -11.5), service providers (-5.1 vs 0.1), traders (-24.6 vs -21.8), and constructors (-15.8 vs -11.6). “The war in Iran has put any hope of a recovery on ice for the time being. Uncertainty among companies has increased noticeably", Ifo President Clemens Fuest said.