The indicator surged to 19.2 points in June, crushing the forecast of 5.1 points.
German ZEW Economic Sentiment is based on a monthly survey of institutional investors and analysts and their views of the German economy.
In a report, the ZEW Centre for Economic Research said that its index of German economic sentiment plunged by 26.0 points to -6.8 this month from June's reading of 19.2.
Investor confidence in Germany fell to its lowest level in almost four years in July on concerns about the fallout from the British vote to quit the European Union, a leading survey showed on Tuesday. It showed that their assessment of the current conditions in Germany was just as pessimistic with a separate gauge of current conditions falling 4.7 points to 49.8, from 54.5 points in June. "Despite Brexit, we're not expecting a recession for the euro area or for Germany", he insisted. The market seems to be underpricing these risks, and the subdued reaction by the Euro to the news might imply that participants are slightly holding back on clear conviction before the European Central Bank monetary policy announcement and the Euro-Zone's Flash PMIs later the week, which could potentially provide data on businesses Brexit implications. This was below forecasts of a reading of 51.8.
President Mario Draghi would probably "take a dovish tone" at the bank's news conference after its rate-setting meeting on Thursday, Hense said.
BayernLB economist Stefan Kipar agreed. As such, the ZEW economic sentiment index from Germany and Europe due for release tonight should fall back in July.