The eurozone’s two largest economies have opened the year with a resilience that has confounded the more pessimistic forecasts, posting first-quarter growth figures that suggest the immediate disruption from the Iran conflict has been more contained than many feared. Spain’s gross domestic product expanded by 0.6 percent in the January-to-March period, easing only two tenths from the previous quarter’s pace yet comfortably beating the 0.4 percent projection of most analysts and the 0.3 percent predicted by the country’s independent fiscal authority. Germany, meanwhile, recorded a 0.3 percent quarterly increase, marginally above the consensus estimate of 0.2 percent and a slight acceleration from the 0.2 percent logged at the close of 2025.

Viewed from Madrid, the data confirm that Spain’s economy retains considerable forward momentum even as external headwinds gather. Private consumption and a still-resilient labour market have provided the bedrock, though the more troubling signal is a sharp deceleration in investment. Analysts in the Spanish capital interpret this as a symptom of corporate caution in the face of an unpredictable geopolitical landscape and rising input costs, a dynamic that could crimp longer-term productivity gains.

The strong productivity performance that had underpinned earlier growth now risks being undermined if companies continue to delay capital spending. In Berlin, the tone is cautiously relieved. Germany’s modest expansion was driven by household spending and public consumption, with exports also posting a slight uptick.

The improvement over the previous quarter is modest but notable given that the full impact of the Iran war on energy prices and supply chains was still unfolding. Economists in Frankfurt warn, however, that the price component remains troubling: rising costs are eroding real incomes and may soon sap the consumer demand that has so far acted as the main shock absorber. From a broader European perspective, the two data points suggest that the immediate economic fallout from the Middle East crisis has been muted, but they do not signal a durable escape from the underlying fragility.

The divergence between resilient domestic demand and faltering investment in Spain mirrors a similar tension across the Continent. Looking ahead, the key risk is that the lagged effects of higher energy prices and sustained uncertainty will begin to bite in the second quarter, dragging on both consumption and business sentiment. Analysts in London note that central banks will be watching these figures closely for signs that inflation expectations are becoming entrenched, which would complicate any pivot towards looser policy.

For now, Europe’s core economies are holding their breath rather than breaking into a sprint. The real test lies in whether they can sustain this pace as the geopolitical storm clouds fail to clear.