Too early to gauge economic impact of attacks on Cyprus
It is too early to gauge the extent of the economic impact on Cyprus of the ongoing conflict in the Middle East, although risks such as inflation are likely, an economist told media on Monday.
“Cyprus is not far from Teheran,” said University of Cyprus professor Marios Zachariades.
“Should the armed conflict drag on, it could alarm tourists and investors. The conflict is close enough to cause concern.”
Speaking to the Cyprus News Agency, the expert said the fallout on tourism is a possibility, but it would depend on how long the war goes on – which no one can predict.
The strikes on the British bases on Cyprus also cause concern, he added, noting that Iran’s far-sweeping retaliation across the region leads to higher uncertainty.
The fact that the strikes on the bases are being covered by international media would have adverse effects – at least on hotel bookings in the short term.
If the conflict ends soon, bookings could bounce back.
“Cyprus provides relative safety compared to other countries in the region. However, for someone from outside the region considering a vacation in Cyprus, or investing here, this creates a ‘cloud’ that will only clear up if the war comes to end in the next few weeks.”
In any case, stressed Zachariades, the events unfolding in the Middle East “serve as a reminder of just how volatile the region is”.
Regarding rising oil prices, the economist said these increase the likelihood of a recession.
Fuel price hikes correlate to how long the Strait of Hormuz would remain closed.
“This affects China more than it does us, but does create uncertainty and a trend for an uptick in prices.”
In the adverse scenario, the situation could lead to inflation.
As to the supply chain, the expert said shipments of goods may also be affected, to a lesser degree.
At any rate, he opined, it’s too early to speak of shortages of commodities – though the possibility can’t be ruled out.
On Monday global oil prices climbed as Iran continued launching strikes across the Middle East in response to ongoing attacks by the United States and Israel.
Brent crude, the global benchmark for oil prices, jumped by 10 per cent to touch more than $82 a barrel after at least three ships were attacked near the Strait of Hormuz at the weekend. Natural gas prices also surged by as much as 25 per cent.
Iran warned vessels not to pass through the crucial waterway in the south of the country, through which about 20 per cent of the world’s oil and gas is shipped.
Leading stock markets in Europe sustained significant drops. Meanwhile, the price of gold, viewed as a safe-haven asset during periods of uncertainty, added 2 per cent to $5,388 an ounce.
International shipping has almost come to a standstill at the entrance to the Strait of Hormuz, with analysts warning that a prolonged conflict could push energy prices even higher.