The Ifo Institute has upgraded its economic forecast for Germany, citing a combination of increased state expenditure and a de-escalation of tensions in the Middle East.
The research body now expects the German economy to perform slightly better this year than previously anticipated, marking a shift in sentiment as the immediate shadow of the ongoing conflict in Iran begins to recede from the domestic outlook.
The revision underscores how rapidly geopolitical risk premiums can influence European macroeconomic projections.
With the prospect of an end to the Iran war on the horizon, businesses are recalibrating their supply chain and energy cost assumptions.
This shift in the risk environment allows the Ifo Institute to factor in a more stable external backdrop, reducing the drag that had previously weighed on the country's growth estimates.
Fiscal policy remains a central pillar of the revised outlook.
The institute points to sustained high levels of government spending as a key driver supporting domestic demand.