In addition to the war reports from Iran and the surrounding area, it is primarily the fuel prices that are currently making the headlines every day. Yesterday the federal government announced To release parts of the state’s oil reserves.

Nevertheless, diesel and gasoline prices are still 10 to 20 percent higher than they were a week and a half ago, when the war began. Crude oil prices have even risen again and are just below the $100 mark.

The Iran war is causing price shifts

In the short term, you’ll notice this especially at the gas pump. Petrol and diesel prices react most sensitively to changes in the price of crude oil. Other sectors can withstand a price shock better over a few weeks. You don’t have to increase prices because of this. But this only works for a limited period of time.

The longer the war and blockade lasts, the more likely the prices of other goods and services will rise. This in turn has consequences for the banking and real estate markets. In the end, you will experience price shifts due to the Iran war that are hardly directly linked to the fighting.

General inflation

Much more than just gasoline and diesel for cars depends on the price of oil. Trucks, ships and airplanes also rely on oil-based fuels. Insurers also charge higher surcharges because of the risk of war and shipping companies increase freight rates. This makes the transport of goods and ultimately all goods more expensive.

As in the energy crisis of 2022, the general inflation rate will rise again at some point. When and how far depends on many factors. But you will feel it first in these industries and products:

• Travel will become more expensive for the summer. Flight prices are already skyrocketing, especially for trips to Asia. This is initially due to the fact that the important hubs Dubai, Abu Dhabi and Doha are no longer available as transfer airports and airlines are therefore canceling many flights. But the price of oil is also important. For airlines, it accounts for around 30 percent of the cost of a flight. The global aviation association IATA reported a price increase of almost 60 percent for jet fuel last week. That alone would make flight tickets more expensive by almost 20 percent.
• heating oil and Natural gas for heating are also very closely related to raw material prices. According to price comparison sites, 100 liters of heating oil currently costs around a third more than before the outbreak of war. The natural gas price at the Dutch trading point TTF, which is important for Germany, has increased by 54 percent. The good news: Since the heating season is almost over, this will only have a minor impact on your heating bill. If the war lasts longer, suppliers and consumers will eventually have to buy heating oil and natural gas at the high prices for the coming winter.
• Groceries and Drinks belong to the transport-intensive industries. What this means is that the transport costs make up a high proportion of the final price. Oil price increases initially affect food that has to travel long distances to be cooled. This includes fresh fruit and vegetables, especially if they are imported. For drinks in glass bottles, the energy price also affects glass production. Next, refrigerated and frozen products, such as dairy products, ice cream and fish, become more expensive. Recently, prices for meat, milk, eggs and baked goods have been rising.
• Fertilizers are also natural gas based. The price increases here so far have only been around five percent. Fertilizers are not directly crucial for you as a consumer. But farmers need them to maintain the yields of their fields. So more expensive fertilizers will impact either crops or farm operating costs in the coming months. Both cause prices in supermarkets to rise.
• Shipping costs for online orders will rise. On large platforms like Amazon, these are capped if Amazon ships itself. However, retailers who only use the platform and providers of other platforms can determine the shipping prices themselves. Logistics giants such as DHL and UPS generally charge fuel surcharges, especially for express and international deliveries.
• Furniture are next. These often contain plastic parts, for example foam, paint, glue and even the fillings in duvets. All plastics are petroleum-based, so their costs increase. Furniture is also one of the transport-intensive industries.
• Building materials such as cement, glass, brick and ceramics usually have to be manufactured at high temperatures. Manufacturers, in turn, achieve this through ovens that run on natural gas. Accordingly, the building materials industry is one of the most energy-intensive sectors in Germany. In addition, the goods are transported to every construction site and every hardware store.
• Other petrochemical products such as cosmetics, cleaning products, paints and textiles also depend on the price of oil. Here, however, the effect will probably occur the latest and will not be as severe as in the previously mentioned sectors.

Interest rates and the real estate industry

But direct price increases for oil or transport-intensive products are just the beginning. These cause inflation to rise. We saw how far this can go in the energy crisis of 2022. At that time, the inflation rate peaked at 8.7 percent. It is currently 1.9 percent.

If the rate rises significantly above the current level, the European Central Bank (ECB) will intervene. Higher key interest rates would be the result. During the energy crisis they rose to up to 4.5 percent. We are currently back at 2.0 percent. Higher key interest rates would have the following effects:

• More interest on daily money: The returns for Current accounts are strongly related to the key interest rate. When this rose from 0 to 4.5 percent in 2022, the overnight interest rates responded with an average increase of 0.03 to 2.6 percent. Since then, they have flattened out again to 1.8 percent, in line with the key interest rate. Higher key interest rates would mean more returns for investors here.
• More expensive loans: With the key interest rates, banks also raise them Loan interest to. Here, however, the connection is less strict. According to the financier Interhyp, the average interest rate for real estate loans with a 15-year fixed interest rate rose from 1.3 to 4.4 percent in 2022. However, the increase started before the ECB’s interest rate change. And although this has since more than halved the key interest rates, real estate interest rates only fell slightly to 3.8 percent. Nevertheless: There will be no cheaper real estate loans if key interest rates rise; they are more likely to rise again.
• Cheaper properties: If the cost of Real estate loans increase, fewer people can afford financing. The demand for real estate would decline accordingly. This in turn affects the prices. Sellers would have to lower these to find buyers. The Postbank Wohnatlas recorded a decline in average prices per square meter of 4.2 percent from 2022 to 2023. Adjusted for inflation, real estate was even cheaper by 10.1 percent. But at the time, that wasn’t enough to offset the costs of higher interest rates. In the end, real estate will continue to become more expensive as a result of financing – just to a lesser extent than due to the rise in interest rates alone.