Cyprus went into the Middle East conflict with three economic advantages working in its favour: a budget surplus of €539 million in January, inflation of just 0.9%, and public debt at 55% of GDP.
The question now is how long those advantages hold — as rising oil prices and a livestock disease crisis threaten to push costs sharply higher in the months ahead.
Second lowest inflation in the EU
Cyprus recorded the second lowest inflation rate in the European Union in February 2026, according to figures released yesterday by the Statistical Service and Eurostat.
The harmonised rate came in at 0.9% — well below the eurozone average of 1.9% and the EU average of 2.1%, and down sharply from 2.3% in February 2025.
Only Denmark recorded a lower rate, at 0.5%. At the other end of the EU spectrum, Romania came in at 8.3%, with Croatia and Slovakia at 4% and Lithuania at 3.3%. Greece recorded 3.1%. Most western European economies clustered between 1% and 2%.
The Statistical Service put the annual CPI rate for February at 0.94%. The biggest price rises compared to February 2025 were in leisure, sport, and culture, up 5.4%, and restaurants and accommodation, up 4.9%. The sharpest falls were in clothing and footwear, down 6.2%, and housing, water, electricity, gas, and other fuels, down 3.5%.
March and April: the months to watch
Those February figures were recorded before the full force of the current crisis hit. The US-Israel war against Iran began on 28 February, triggering an immediate negative market reaction amid fears of energy supply shortages. Oil prices have remained just above $100 a barrel since, approaching $110 yesterday.
Cyprus imports fuel for both transport and electricity generation, meaning incoming cargoes will arrive at significantly higher prices.
Fuel is one of the most decisive factors shaping inflation: it drives up logistics costs passed on to consumers, pushes electricity prices higher, and increases production costs across industries that rely on energy in their processes. Those effects take time to work through — which is why March and April are the months that concern analysts.
The foot-and-mouth factor
The second pressure point is the foot-and-mouth disease outbreak affecting sheep, goats, and cattle, and how far the livestock crisis will feed through into food prices.
The scale of that risk is visible in the February data. The food price index rose 2.70% year-on-year — and that was recorded without significant FMD cases and without increases in electricity or road fuel costs.
The culling of infected and suspect animals is gradually reducing meat and dairy output. With supply falling and demand stable or rising ahead of Easter, price rises are inevitable.