Economists have been examining the inevitable economic consequences of the war in Israel, particularly its influence on fuel and electricity costs. Energy Minister George Papanastasiou's recent statement on SPOR FM made it clear that we should brace for rising prices, starting with fuel, affecting both fuel and electricity bills.
As the Minister noted, conflicts in the Middle East tend to drive up oil prices. With recent developments and OPEC's goal to increase oil prices to $100 per barrel, it's evident that price hikes are on the horizon. The oil market initially reacted with a 4% price surge, but prices dipped slightly on Tuesday, reaching $87.8 per barrel for Brent and $85.8 per barrel for U.S. crude.
Economist Pambos Papageorgiou, speaking to "K," highlighted that Cyprus, relying heavily on fuel oil for electricity production, faces a significant vulnerability to raw material price increases. Already, a 3% rise in electricity bills has been announced, calculated based on a previous load. Should the Israel crisis persist, further electricity price increases can be expected.
Economists stress that the negative effects of these developments are directly linked to the intensity and duration of the conflict. The situation remains dynamic and closely monitored. While it's too early to draw definitive conclusions, the magnitude of the impact, both in Israel's region and globally, will largely depend on the duration of these ongoing conflicts.
Economist Tasos Giasemidis warned that prolonged uncertainty and volatility could push up prices and inflation, which recently rose at a 4% rate. Global economic slowdown due to rising interest rates is already evident, and any events causing market disruption related to interest rates could further slow down the market and exacerbate inflation.
These developments present new variables for the government in considering accuracy measures. If the situation leads to economic slowdown, the Ministry of Finance may need to reconsider the size and content of the measures they plan to announce.
The proximity of Cyprus to Israel has also brought it into the cruise sector's focus, with an estimated 350,000 passengers and 207 scheduled ship arrivals this year. Many cruise itineraries include stops in Israeli ports, such as Haifa and Ashdod. In response to the volatile situation in Israel, some cruise companies, like Celestyal, have temporarily suspended their approaches to the country until the end of November.
The ports of Israel are operating normally for now, and the Port of Limassol in Cyprus is ready to handle cargo requests. However, there have been no delays or cancellations in the supply chain or container transport so far, and trade remains unaffected. Air cargo transportation is also proceeding smoothly without cancellations or delays.
In summary, the war in Israel is already impacting the economy, with rising energy prices and potential implications for the region's trade and tourism sectors. The situation remains fluid and closely watched for further developments.
[This article was translated from its Greek original]
