German investor sentiment outperformed expectations after markets priced in a
rapid end to the Iran conflict, reducing near-term energy-price and inflation
risks. ZEW’s economic sentiment index rose to 10.5 in June from -10.2 in May,
well above the median forecast of -6; the current-conditions index fell further
to -81. ZEW said financial-market experts view the Iran crisis as approaching
its end, a dynamic that could ease inflationary pressure and support
energy-intensive sectors, households and domestic demand. The Bundesbank expects
defence and infrastructure spending to add about 0.5 percentage point to growth,
but Germany is still forecast to record only modest expansion in 2026 as the
Middle East conflict weakens prospects for a stronger rebound. News of a US-Iran
temporary restart of a Strait of Hormuz agreement should relieve market tension,
though a promised resumption of trade by the weekend is uncertain and hinges on
how quickly oil flows are restored amid divisions among European allies.
