The impact of the Middle East war on Cyprus is already being felt across key sectors, from fuel costs to tourism. With Iran threatening disruption in the vital Strait of Hormuz- through which a quarter of the world’s oil flows- regional instability is triggering economic ripples that reach the island’s ports, airports, and consumer markets.
Iran, following US airstrikes and rising tensions in the Gulf, has suggested it may block or disrupt tanker traffic through the Strait. While it has no legal authority to shut down international shipping lanes, it could exert control through harassment tactics, fast patrol boats, drone strikes or missile fire from coastal positions- all of which would increase the danger to commercial vessels operating in the region.
The risk of escalation prompted Greece’s Ministry of Shipping on Sunday to advise its vessel owners to reconsider transiting the Strait, signalling growing international concern.
Although oil shipments through Hormuz had remained relatively stable until the latest escalation, Iran has previously threatened closure multiple times and has targeted commercial vessels in the past. Any significant disruption could cause oil prices to surge and strain energy-dependent economies.
Global choke point, and who it hurts
Several major exporters rely on the Strait of Hormuz, including Saudi Arabia, Iraq, Kuwait, Qatar and Bahrain, all of whom route much or all of their oil through it. While the UAE and Saudi Arabia have some alternative pipelines, the Strait remains a critical artery for Asia-bound energy exports.
Even Iran itself depends on Hormuz to export most of its oil, despite having a secondary terminal at the eastern edge of the waterway.
The potential closure of the Strait thus represents a form of mutually assured disruption, and it is already reverberating across nearby economies, including Cyprus.
Impact of Middle East war on Cyprus: energy, tourism and trade
Speaking to Economy Today, economist Giannis Telonis outlined the direct and indirect impact of the Middle East war on Cyprus, highlighting both vulnerabilities and short-term gains.
Tourism remains the most fragile sector
Tourism, Telonis noted, is highly sensitive to geopolitical instability. The sight of missiles in nearby skies, even if distant, can deter holidaymakers, particularly as Cyprus is geographically close to Israel and Lebanon. Additionally, losses from the north continue to weigh on the industry.
That said, the influx of Israeli nationals fleeing the conflict has filled hotels in key districts. While this creates pressure on infrastructure, it also brings economic benefits. Many of these arrivals are wealthy and spending, which provides emergency revenue for local businesses.
Income from military and evacuation logistics
Cyprus is also profiting from its strategic location in the evacuation plans of multiple countries. American warships are docked in Paphos, while military and civilian aircraft continue arriving at Larnaca Airport. According to Telonis, landing fees alone can range from €30,000–€40,000 per aircraft for two-week stays- and with over 500 additional flights in recent days, these earnings add up.
Rising fuel costs and supply pressures
Although Cyprus imports refined fuel rather than crude oil, global price hikes and freight costs are already feeding through to consumers.
The Minister of Energy recently authorised the release of kerosene reserves to avoid shortages, especially with increased aviation demand. Fuel prices rose by 1–2 cents last week and are expected to climb further.
Maritime insurance costs are also spiking due to instability around Hormuz. Many shipowners are pulling vessels out of the region, while others are raising charter fees to offset high-risk premiums- costs that eventually trickle down to import-dependent economies like Cyprus.
Broader economic forecast: uncertain, but not hopeless
The war’s uncertainty is expected to slow domestic consumption, but the summer tourist season may still mitigate losses. Telonis warns that Cyprus must remain flexible and proactive- using this period to pursue internal reforms and strengthen alliances.
While the impact of the Middle East war on Cyprus is serious, Telonis insists the greatest long-term risk is not the conflict itself but failing to implement structural reforms. Without these, Cyprus could lose up to €30 million in EU funding, he warned.
He also noted that the EU has pledged €750 million to Cyprus over the next two years, conditional on policy progress. If managed wisely, the current crisis could become an opportunity- but only with the right leadership and investment strategy.
Also read: Iran responds to US airstrikes with missile attacks
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