FRANKFURT, Germany, May 8, 2026 (BSS/AFP) - German industry is struggling to recover as the Middle East war heightens uncertainty and raises costs, data suggested Friday, hitting Europe's top economy amid a prolonged slump.

Industrial production fell 0.7 percent in March versus February, federal statistics office Destatis said, while Germany's monthly trade surplus of 14.3 billion euros ($16.8 billion) was its lowest since May 2023, with imports rising much faster than exports.

Taken together the data suggested that Germany's economy was growing more slowly than the previously reported rate of 0.3 percent in the first quarter, ING bank analyst Carsten Brzeski said.

"Downward revision of first quarter growth has become more likely," he said, adding the data suggested that Germany's economy had "worsened with the start of the war in the Middle East".

Iran has effectively closed the Strait of Hormuz, a sea lane which usually carries about a fifth of global oil and gas supplies, in response to US-Israeli attacks that plunged the Middle East into a new war.

Energy prices have since soared, hitting Germany's energy-intensive economy that has a range of power-hungry industries including steel and chemicals as well as their downstream customers.

The closely-watched Ifo confidence barometer, a measure of business sentiment, in April dropped to its lowest level since the Covid pandemic and a less volatile quarterly comparison shows industrial production 1.2 percent lower in the first three months of 2026 than the last three of 2025.

The data are another headache for Chancellor Friedrich Merz, who has made getting Germany's economy back on its feet a top priority.

Europe's powerhouse has posted virtually no growth since a burst of pent-up pandemic demand in 2022, hit by spiking energy costs after Russia's full-scale invasion of Ukraine and increasing Chinese competition in key export industries.

Sweeping global tariffs imposed by US President Donald Trump last April have also hit trade. German exports to the United States were down 21.4 percent in March year-on-year, Destatis said.