Germany's ZEW Indicator of Economic Sentiment rose 15.8 points to 26.3 in July 2026, following a 20.7-point jump in June and comfortably beating market expectations of 18. The reading marked the highest level since February, before the Middle East conflict weighed on global confidence, suggesting that Germany's reform package is beginning to support the economic outlook. The improvement was driven by stronger expectations for export-oriented industries and resilient domestic demand, although the conflict in Iran and elevated oil prices remain key risks to the recovery. Most sectors posted gains in July, led by mechanical engineering (+14.5 points) and private consumption (+14.7 points). The construction sector also improved by 12.7 points, approaching neutral territory. Meanwhile, the chemical, pharmaceutical, and metal industries remained in negative territory despite modest gains, while the automotive sector weakened sharply, with its sentiment balance falling 11.3 points to -46.6.