Energy prices increase from Iran war to dampen Germany’s recovery only slightly, DIW says

DIW forecasts German GDP growth of 1.0% in 2026 and 1.4% in 2027 (after 0.2% in 2025), with a modest recovery driven by public consumption and stepped-up government investment. A recent energy price rise tied to Middle East tensions is smaller than the 2022-23 crisis but could add ~0.4 percentage points to inflation this year and shave 0.1–0.2 percentage points off growth. DIW projects inflation of 2.4% for 2026 and 2.3% for 2027 and expects no further ECB rate hikes; U.S. trade moves (a 150-day global 10% levy) have had no noticeable impact on German exports so far.

Analysis

A contained energy shock combined with tariff volatility creates a squeeze that is asymmetric across sectors: energy‑intensive industrials (chemicals, steel, auto suppliers) face margin compression and potential capex delays, while pockets of public spending (defense, infrastructure, data centers) see accelerated order visibility. Supply‑chain re‑routing incentives from an uncertain global levy favor local suppliers and systems integrators over long, low‑cost offshore supply chains — that raises pricing power for European mid‑caps that can win reshoring mandates.

For technology markets, the relevant bifurcation is hardware demand versus ad‑tech cyclicality. Higher and more volatile input costs plus potential tariffs make predictable, backlog‑driven businesses (AI compute hardware and systems integrators) relatively more investible than demand‑sensitive ad revenue models. This dynamic amplifies positive skew for firms that can convert short‑cycle bookings into durable backlog and FCF.

Macro risks concentrate around policy error and tail escalation: a material Middle East flare that pushes oil sharply above prior peaks or reciprocal trade retaliation that broadens tariffs would re‑price inflation and force central banks to keep real rates higher for longer — a rapid unwind scenario for rate‑sensitive growth names. Time horizons: headline oil shocks move markets in days–weeks; supply‑chain and capex re‑allocations play out over quarters to 2 years, offering a window to position around winners/losers.

Key Decisions for Investors

• SMCI: Buy a 6–12 month call spread (size 1–2% NAV) to express AI compute demand acceleration tied to defense/infrastructure capex. Target asymmetric payoff (aim for 50–100% upside if hardware cycle re‑rates); stop‑loss 30–35% on premium. Rationale: captures durable backlog and limited supply elasticity vs cyclical ad exposures.
• APP: Open a 3–6 month put spread (smaller size, 0.5–1% NAV) to hedge ad‑revenue cyclicality and fund rotation into hardware. Pair with SMCI long calls (ratio ~1:0.5) to create a market‑neutral hardware vs adtech tilt. Expect payoff if ad demand softens or customer CAC rises; cap loss to premium paid.
• Macro pair: Over 3–6 months, overweight financials (XLF, 1–2% NAV) versus export‑heavy Germany exposure (short EWG or DAX futures, equivalent risk). This expresses the view that sticky cost push inflation will support NII while exporters suffer from tariff/friction headwinds. Cut if oil breaches a high‑conviction shock level that forces a global growth re‑pricing.