GBP Monitor: War in the Middle East Weighs on German Companies – Hidden Reserves Dwindling, Tax Cuts Even More Important than Energy Cost Subsidies

Türkisfarbene Mappen liegen auf einem schwarzen Tisch. Die Mappe haben die weiße Aufschrift "SFB/Transregio 266, Accounting for Transparency".

The hidden reserves of German companies are noticeably shrinking. In February, around one in three companies was still able to build up reserves through profit-reducing accounting policies – since then, this share has halved. A key factor has been the escalation in the Middle East, which has further intensified economic pressures. Rising energy prices and disrupted supply chains are increasing cost pressures for companies. Almost 70 percent of the companies affected are responding with price increases, while 35 percent are planning cuts to fixed costs, particularly through layoffs. At the same time, expectations toward policymakers are rising: Companies identify substantial tax cuts as the most important structural reform – even ahead of energy cost subsidies. This is shown by a recent study by the German Business Panel.

The ongoing military escalation in the Middle East is increasingly having global economic repercussions. Since the end of February, the military confrontation between the United States, Israel, and Iran has expanded into a broader regional conflict. At the latest with the closure of the key shipping route through the Strait of Hormuz, energy prices have risen significantly and international supply chains have been severely disrupted. A short-term easing of tensions is not currently in sight, despite ongoing peace negotiations.

The effects are also being felt in Germany. This is shown by the latest GBP Monitor from April 2026: Almost every second company (49.6 percent) already reports financial burdens as a result of the conflict. The main causes are sharply rising energy costs (72.8 percent), increasing planning uncertainty (39.0 percent), and disrupted supply chains (22.8 percent).

Cost pressures rise – financial buffers are shrinking

The financial burdens are increasingly accompanied by a reduction in hidden reserves. While companies deliberately used accounting leeway before the war to build financial buffers, this has become significantly more constrained under current conditions. The share of companies using profit-reducing accounting policies has fallen from 33.8 percent to 18.1 percent since the start of the war. “This is a clear sign that companies’ financial leeway is diminishing and their ability to respond to further pressures is declining. This could have prolonged negative effects on investment decisions and employment,” explains Professor Jannis Bischof, academic project manager of the German Business Panel.

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