The Munich-based IFO Institute has issued a report on the impact of the Iran war on German households. “Three results stand out,” according to the 23-page report on their study, titled, “A Regressive Shock? The Distributional Consequences of Middle East Conflict-Driven Inflation for German Households.”
“First, the shock is not negligible in the aggregate: It raises household expenditures by around EUR 16.8 billion in 2026, of which only a small part (EUR 3.5 billion) is taken in by the government through higher consumption tax revenue, meaning most of the loss is absorbed directly by households as higher spending on the same basket of goods. Second, the loss is clearly regressive. Bottom-decile households lose several times more, as a share of their income, than top-decile households, in both the tax-channel and full-shock measures, and the gap is wider once the full price effect is taken into account. Third, the burden is not fully expressed by the income-decile pattern alone: Elderly households, both single and in couples, are among the most affected household types, reflecting their higher exposure to home heating costs.”
