The war being waged by President Donald Trump and Benjamin Netanyahu against Iran’s theocratic regime is fast turning into an energy thriller with unpredictable consequences, sending shockwaves through energy markets and raising wider risks for trade, tourism and investment.
What is already clear is that the cost will not be borne by those dropping the bombs, but by ordinary people, including households in Cyprus.
How severe the fallout becomes will depend largely on the intensity and duration of the fighting. The war is already in its fourth week, and the escalation of attacks on oil and energy infrastructure in the Gulf has pushed the crisis into a new phase that experts warn could upend the global energy market.
The Cypriot government has so far reacted calmly, but remains on alert in case it needs to act. While Eurogroup President Kyriakos Pierrakakis has said he is open to discussing measures to protect households, Cyprus’ finance minister initially judged that no extra action was needed. At the same time, the Ministry of Energy, Commerce and Industry has said it is ready to intervene immediately if unjustified price rises or fuel shortages emerge that are not explained by real market conditions. Eurogroup President Kyriakos Pierrakakis holds the post as of March 2026, according to the Council of the EU.
Energy Minister George Papanastasiou told Phileleftheros on Sunday that although prices are rising, the increases are currently justified by the situation in the Middle East and by international fuel prices. That means no profiteering has, for now, been detected among Cypriot importers or petrol station operators. He added that the government was monitoring the situation and working on measures that could be introduced at the right time.
Economist and KPMG Cyprus chief executive Tasos Yiasemides said the escalation in the Middle East, and especially the conflict involving Iran, had created new pressure on international energy markets, pushing prices higher and reigniting inflation. Speaking to philenews, he said the impact would be felt not only by national economies but also by living standards, as higher energy costs gradually spread across all areas of economic activity.
According to Yiasemides, inflation is one of the most important economic forces affecting households’ purchasing power and economic stability. It reflects a sustained rise in the general level of prices for goods and services. As inflation rises, money loses part of its value, meaning consumers can buy less with the same income. Energy plays a central role because it is a basic cost factor for production, transport, agriculture and industry. When energy prices rise, production costs rise too, eventually feeding through into higher prices for final goods and services. He said central banks often respond to a sharp increase in inflation by raising interest rates, making borrowing more expensive and potentially reducing both consumption and investment.
The cost of electricity is also set to rise. Electricity Authority of Cyprus chairman George Petrou said that for May, based on a Brent crude price of around $102 a barrel, the increase in electricity prices was estimated at about 5%. He added, however, that because of the recent rise in prices and an incoming cargo due in early April, the increase could move between 5% and 7%.
Looking further ahead to August, he said that if oil rises to between $110 and $115 a barrel, the increase in electricity prices could reach as much as 20%.
Fuel prices in Cyprus have already been moving upwards since the start of March. According to petrol retailers’ association president Savvas Prokopiou, this is a normal development caused by instability linked to the Middle East conflict. He described to Phileleftheros on Sunday an extremely fluid situation marked by constant increases. “On average, every two or three days we have new prices,” he said, adding that prices rose six times between March 3 and March 19.
Data from the Consumer Protection Service show that from February 27 to March 19, retail prices rose by 14.3 cents per litre for unleaded 95, 22.7 cents for diesel and 18.7 cents for heating oil. The director of the Consumer Protection Service, Constantinos Karagiorgis, said last Thursday that international fuel prices were dramatically higher than on February 27. Unleaded 95 had risen by 57%, diesel by 80% and heating oil by 76%. If prices stay at those levels or rise further, more retail increases are expected in the near term, adding to the pressure.
Both the petrol retailers’ association and the Consumer Protection Service reject the idea of imposing a price cap, arguing that the problem is not profiteering but the jump in wholesale prices internationally.
They would, however, support the return of a reduction in fuel excise duty, as happened in 2022 and 2023. It is worth noting that when the government subsidised fuel excise duty in 2023, retail prices were between 7 and 10 cents higher than they are today.
Energy expert Charles Ellinas told philenews that if Brent remains at $105, petrol in Cyprus could reach €1.65 a litre. In a worst-case scenario in which Israel does not stop striking gas and oil installations, Brent could rise to $150 and petrol in Cyprus could in turn reach €2.15 a litre.
At this stage, the war is centred on energy and, by extension, the economy. That is precisely where Iran appears to have wanted to steer developments from the outset. All indications suggest the theocratic regime has endured and, for now, will remain in power despite heavy US and Israeli strikes aimed at eliminating senior figures.
A key part of that geopolitical equation is the Strait of Hormuz, one of the world’s most important maritime chokepoints for oil transport. A large share of global oil and liquefied natural gas passes through it, and any disruption to shipping or to energy infrastructure in the area can have an immediate effect on global energy supply. Reuters reported this week that Kaja Kallas had warned the war’s impact on energy prices was a major concern for Europe and highlighted efforts to keep shipping moving through the strait.
Andreas Krieg of King’s College London told Al Jazeera that Iran relies heavily on its geography. According to him, Tehran is pursuing a strategy of endurance, trying to win concessions and exert pressure where it can. Its strongest tool is control of the northern coast of the Strait of Hormuz. That gives it leverage over the global economy and the United States, and allows it to sustain pressure over a long period, making any quick military solution extremely difficult. King’s College London identifies Andreas Krieg as a senior lecturer, while recent coverage has also described him as an associate professor.
Cyprus Chamber of Commerce and Industry president Stavros Stavrou warned of a serious risk of prolonged high prices. He said the war in Iran and the broader destabilisation of the region were creating a new, high-risk environment for the Cypriot economy, with energy and tourism as the two main pressure points.
“The de facto obstruction of shipping through the Strait of Hormuz has already begun to affect the global economy, because it is an extremely critical sea corridor through which significant quantities of the world’s oil and natural gas pass,” he said.
“This disruption is leading to immediate upward pressure on international energy prices, with a serious risk of prolonged high prices if the crisis continues. For Cyprus, this means more expensive fuels, higher electricity generation costs, pressure on transport and a broader rise in operating costs for businesses. Unfortunately, further increases are expected in freight rates, transport prices and ultimately the cost of imports, and consequently imported inflation and pressure on the competitiveness of our businesses,” he added.
Stavrou said tourism was also highly exposed in periods of geopolitical tension. International experience shows that when conflict breaks out in the wider neighbourhood, traveller sentiment, booking decisions and air connectivity are all affected. He said Cyprus was already seeing some cancellations and slower booking flows for summer just as the tourist season was beginning, calling that an early warning sign.
“For Cyprus, the priority is to protect the momentum of this season. Emphasis should be placed on stability and on the image of our country as safe, immediate and reliable communication with our partners abroad, close cooperation with airlines and tourism organisations, and continuous monitoring of booking trends,” he said.
“As CCCI, we call on all competent authorities to act with speed, coordination and a clear message: Cyprus remains a safe, organised and welcoming destination. Cyprus continues with its daily life,” he added.
Cyprus Consumers Association president Marios Drousiotis said the war in the Gulf was having both direct and indirect effects on consumers, mainly through higher fuel and energy prices and disruption to supply chains.
He said Cyprus, as a small open economy heavily dependent on fuel, energy and imports, was especially exposed. That meant more expensive fuel and electricity, dearer imports, pressure on tourism and greater uncertainty for businesses that could in turn delay new investment.
Drousiotis said consumers should compare fuel prices and use cheaper stations, cut energy use and unnecessary travel, avoid waste, choose Cypriot products where possible, and plan purchases more carefully while avoiding non-essential spending.