Strait of Hormuz: What now awaits mechanical engineering

What is escalating in the Persian Gulf can definitely be felt in German factory halls. The war with Iran and the closed Strait of Hormuz are weighing on German mechanical engineering not only through direct business with Iran, but above all through higher energy prices, disrupted supply chains, and geopolitical uncertainty.

"It was to be expected that the stability of supply chains would again be clearly threatened by the war," explains Markus Kuger, chief economist at Coface (credit and risk management). "In the metal industry it may not be quite as serious as in the chemical industry, because many chemical precursors come from the Gulf region."

Three scenarios for the global economy

In his presentation at the Coface congress, Kuger outlined scenarios for the global economy, with the base scenario and the alternative each assigned a probability of 40%, and the adverse scenario 20%.

• In the base scenario, the Strait of Hormuz will reopen by mid-May, and damage to oil and gas infrastructure will remain limited. Government spending and inventories cushion the shock. Inflation rises only temporarily and moderately, and key interest rates remain stable.
• In the alternative scenario, oil and gas prices remain 50% above the pre-war level, energy shortages lead to supply chain disruptions, especially in developing countries, and inflation rises significantly. Key interest rates increase worldwide.
• In the adverse scenario, oil and gas prices double compared with the pre-war level, there are declines in production in many sectors and countries, and financial markets react with dislocations. On top of this come significant spillover risks.

Aluminum, energy, and tankers: Where the pressure is building

The effects of the war are already being felt, especially for energy-intensive raw materials and in logistics. Among the metals, aluminum is suffering the most. The reason: production is very energy-intensive and often takes place in the Gulf.

“Asian companies are in an even more difficult position than we Europeans because their suppliers are often located directly in the Gulf,” says Kuger. Europe’s energy also comes from Norway, Algeria, or the US. “But due to the close interconnection of the global economy—for example, when goods come to Germany via Morocco—the rule is: the longer the war lasts, the worse it gets.”

“You can follow this on websites that track tanker movements,” Kuger adds. According to these, ships that were actually on their way from Brazil to France are being rerouted shortly before arrival and sent instead to Taiwan or South Korea because liquefied gas is running short there. “These countries then pay any price.” As a result, availability in Europe shrinks and prices rise worldwide, the chief economist reports.

On top of this come war surcharges on containers as well as significantly higher charter rates for tankers. “Around eight to nine percent of transport capacity is stuck in the Gulf and not getting out,” says Kurt Lennartz, head of risk underwriting mid market / credit line at Coface. This has concrete consequences for global supply chains: “Even if you want to transport oil from Canada to Japan, the tanker needed for that may be missing because it has been stuck in the Gulf for two months.”

Investments are being postponed or canceled

In the current situation, machine manufacturers are being hit twice, Lennartz continues. “They have already been impacted by US tariffs and are now also feeling weak demand in China and Europe.” In the US, purchasing new equipment is becoming more expensive, so investment decisions are changing there as well. According to Lennartz, many companies are putting projects “on hold” and considering whether they really need to replace a machine or can keep the old one running longer.

A development that Grob has also noticed. According to this, customers have postponed projects worth 950 million euros by an average of twelve months. Orders totaling around 550 million euros have been canceled altogether. “Right now, customers in electromobility are pretty happy and pretty quick to push projects back,” explained Christian Müller, chief sales officer, at the company’s annual press conference.

Other figures also paint a clear picture: “Mechanical engineering has now been in decline across the board for the fourth quarter in a row. Not only in terms of sales, but also in terms of employee numbers,” Lennartz sums up. The experts at Coface are also seeing this in the volume of limit applications submitted: “If business were improving, companies would actually have to request higher limits after weak quarters in order to do more business again. These requests are currently absent in mechanical engineering,” says Lennartz.

This indicates that companies can cope with the existing limits because no new business is coming in. “In addition, we are seeing more losses overall.” The entire industry is currently flying blind.

Why positive signals can be misleading

Nevertheless, order intake picked up again at the end of last year. According to the Federal Statistical Office, order intake in the manufacturing sector in December 2025 was 7.8% higher than in the previous month after seasonal and calendar adjustments. According to Kuger, however, this was often due to large-scale orders or defense projects, which skews the picture.

“You can now see that traditional mechanical engineering companies are suddenly trying to build drones because that is where money can be made. That seems to be the only area with government contracts,” says Kuger. But that is not a sustainable business model.

The current situation is also reflected in sentiment: The ifo business climate index fell to 84.4 points in April, down from 86.3 in March. This is the lowest level since May 2020. “While the current situation is still being rated as stable – albeit at a low level – expectations for the next six months have deteriorated. Energy has become more expensive, and the availability of intermediate products is uncertain,” explains Kuger.

Stockpiling out of fear instead of growth

This is also reflected in the purchasing managers’ index. “It has risen surprisingly, which actually points to growth,” says Kuger. But on closer inspection it becomes clear: “Companies are buying more intermediate products because they are afraid they will be even more expensive next month or no longer available at all.”

According to Kuger, this is therefore a fear-driven inventory build-up and not a sign of a booming economy. “People are waiting longer for goods because the system is under strain.”

There are still sufficient inventories, says Lennartz. But: “The question is which company reacted in time. The raw materials have not disappeared; they just take longer routes.” That has to be factored in. Companies therefore have to place orders earlier to avoid shutdowns. In addition, “Asia is even more dependent on energy, and many intermediate products for mechanical engineering come from there,” says Lennartz.

The focus is already on 2027

Looking ahead to 2026, Kuger also dampens expectations: The economic upturn will not materialize. So should companies already be looking toward 2027?

“The outlook stands or falls with Iran,” says Kuger. “If this war continues, 2027 will not be a good year either. Energy prices are indeed high, but not at the 2022 level.”

The special fund will be “spent gradually.” So far, however, this is mainly visible in the defense sector. “But at some point, highways, railways, and schools will also have to be renovated. That takes time.”

Even if the war ends quickly, the consequences will be felt for a long time to come. “Even if the war were to end tomorrow, it would take until the end of 2026 to clear the backlog in raw materials and energy.” Accordingly, the focus must already be on the year 2027 today.

Another problem is the severely damaged infrastructure. Pipelines and refineries have been hit. Qatar Energy has stated that repairing the full production capacity “could take three to five years.”

Payment delays signal more insolvencies

What may already become apparent in 2026 is a rise in insolvencies in mechanical engineering. “In credit insurance, we have an early indicator through non-payment notifications, which gives us about half a year to a year of lead time. We are currently seeing an increase in these notifications of payment delays,” reports Lennartz.

This means that, with some delay, a similar spike in insolvencies or claims will likely be seen. “The curve is continuing to rise. This will keep us busy throughout all of 2026,” says the expert.