German investors' expectations index sees significant decline as threat of war with Iran hampers economic recovery.

With the outbreak of the Iran war, expectations of a strong recovery in Europe's largest economy, Germany, have cooled somewhat, with investor confidence in the country deteriorating far beyond expectations. In March, the ZEW Institute's expectations index fell from 58.3 in February to -0.5. This value is lower than all forecasts in the Bloomberg survey and is also the lowest level since Donald Trump first announced tariff measures in April last year. However, the indicator for measuring the current situation unexpectedly improved. "The escalation of the Middle East situation has raised energy prices and exacerbated inflationary pressure," ZEW President Achim Wambach said in a statement on Tuesday. "This increases the risk of a slowdown in the German economic recovery. The ultimate impact will depend on the severity and duration of the conflict." German government bonds continued to rise, with the yield on the 10-year bond falling by 3 basis points to 2.92%. Traders also reduced bets on rate hikes, with the interest rate swap market indicating a tightening of monetary policy by around 39 basis points by the end of the year.