Iran's War Strikes at the Horizons of the Global Economy

The German Industry Association (BDI) has predicted that the Iran war will negatively and significantly impact global economic growth, leaving tangible repercussions on the German economy. In its report on global growth forecasts, the association stated that hopes for an economic recovery that emerged at the beginning of the year have been severely dealt a blow by the conflict. The BDI expects the global growth rate to decline by approximately half a percentage point to reach 3%. It added that large-scale investments in artificial intelligence (AI) prevented a more pronounced slowdown. The association noted that, absent the war, the recovery in demand and the AI boom would have pushed global economic growth to between 3.3% and 3.4%, compared to a rate of 3.2% in 2025. For Germany, following a strong performance in the second quarter, the BDI forecasts real growth of 0.6%. According to the statement, BDI CEO Tania Gonner said: “The consistent implementation of investment plans and the reform agenda remains an urgent priority to strengthen Germany’s growth engines... The risks and global uncertainty facing businesses remain high.” The association clarified that if the conflict continues and navigation through the Strait of Hormuz is disrupted, the global economy is expected to experience a greater slowdown in growth. The BDI also anticipates that global inflation will rise by more than one percentage point to exceed 4.5%. The report highlighted significant regional disparities, forecasting that the US economy will grow by slightly over 2%, while Europe is likely to endure a period of weakness with growth of 0.8%. Meanwhile, the Chinese economy is expected to grow by 4.6%, a rate the report described as relatively weak.