Energy markets under pressure
Global energy markets are facing renewed volatility as geopolitical tensions in the Middle East intensify, with analysts warning that the situation could trigger a prolonged oil price surge affecting economies worldwide, including Cyprus.
Speaking on the television programme “Mesimeri kai Kati“, economic analyst Yiagos Hadjiyiannis said the ongoing conflict involving Israel, the United States and Iran is already having clear geopolitical and economic consequences. He noted that Cyprus, as a neighbouring country in a sensitive region, is particularly exposed to developments.
Strait of Hormuz concerns deepen instability
A key factor behind the current oil price surge is the heightened uncertainty around the Strait of Hormuz, through which around 20% of global oil trade flows.
According to the analyst, any disruption in the strait has immediate global repercussions, particularly for Asian markets that rely heavily on energy imports from the Gulf region. The situation has contributed to significant instability in oil and energy pricing.
Global institutions warn of prolonged crisis
International Energy Agency (IEA) officials have also warned that April could be even more challenging than March for global energy markets, even if the conflict de-escalates in the near term.
The International Monetary Fund (IMF) and the World Bank are reportedly preparing emergency liquidity support packages worth tens of billions of dollars to assist vulnerable economies affected by the ongoing energy shock linked to the oil price surge.
Despite the uncertainty, officials stressed that global strategic reserves remain largely sufficient, with over 80% still available.
Impact on Cyprus economy and tourism
Economists in Cyprus caution that sustained pressure on energy markets could affect inflation, borrowing costs, and key sectors such as tourism.
Hadjiyiannis noted that while Cyprus has so far maintained relative economic stability, travel advisories from major markets such as the United States and the United Kingdom could continue to weigh on tourism demand.
He added that fuel costs remain a critical transmission channel for the oil price surge, influencing transport, goods prices, and overall economic activity.
Interest rates and fiscal response
Financial analysts also expect the European Central Bank to closely monitor developments, with potential adjustments to monetary policy if inflationary pressures persist.
A possible 0.25 percentage point interest rate adjustment in June has been discussed by some market observers, which would gradually affect variable-rate loans across the eurozone.
At the same time, governments are being encouraged to implement targeted measures to cushion households and businesses from the impact of rising energy costs linked to the oil price surge.
Outlook remains uncertain
Experts warn that prolonged instability could delay investment projects and increase economic uncertainty across Europe and the wider region.
While short-term risks are being partially contained through international coordination, analysts stress that the duration of the crisis will determine its long-term economic impact.
Also read: IEA: April “even worse than March” for energy markets
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