Economists and state officials in Cyprus are warning that the duration of the war between US-led forces and Iran will be the decisive factor in the island’s economic stability, as energy prices threaten to reach historic highs.
While the domestic market currently remains stable, a prolonged war could trigger a severe inflationary shock. Sectors such as tourism, construction, and retail are already showing signs of vulnerability to external pressures and supply chain volatility.
Energy and commodity price surge
The most immediate threat stems from a potential spike in oil and gas prices. Qatar’s Energy Minister, Saad al-Kaabi, warned this week that the war could “devastate the world’s economies,” predicting oil prices could soar to $150 per barrel. This follows a drone strike on Qatar’s Ras Laffan LNG plant—the world’s second-largest producer—which forced the company to declare force majeure.
The construction sector is already feeling the impact of these regional disruptions:
- Aluminium & Steel: Prices have recorded their sharpest weekly rise since late 2024 as Middle Eastern smelters, which account for 10% of global production, cease operations.
- Shipping Costs: Cypriot contractors are facing a “War Risk Surcharge,” with container costs increasing by $1,500 to $4,000 per unit.
Despite these pressures, Petrolina CEO Dinos Lefkaritis has reassured the public that fuel supplies in Cyprus remain sufficient, as companies have already activated alternative procurement routes.
Tourism and retail
The tourism sector, a cornerstone of the Cypriot economy, faces uncertainty regarding Easter and summer bookings. While flight cancellations have caused immediate disruptions, the industry has historically shown resilience during regional crises.
In the retail sector, social media reports of empty shelves have prompted a response from the Cyprus Retailers Association (PASYLE). General Secretary Marios Antoniou dismissed fears of shortages, stating that basic goods are stocked for at least 30 days. “Any gaps on shelves are a matter of restocking time from warehouses, not a lack of products,” he clarified.
However, consumer anxiety remains high, with increased demand for dry goods, infant formula, and diapers noted at supermarkets across the capital.
Financial markets in turmoil
Global financial markets are experiencing significant volatility. Under the shadow of a prolonged conflict, investors are fleeing to safe-haven assets.
- Gold: Prices have surpassed $5,400 per ounce.
- Currencies: The US dollar has strengthened as stocks decline.
- Inflation: Regulators are on high alert for speculative phenomena that could further burden the global economy.
With US President Donald Trump suggesting the war could continue for weeks, the focus of the Cypriot Ministry of Finance remains on managing the secondary inflationary effects of the crisis.
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