The economic team remains vigilant in light of recent developments in the Middle East, particularly following intensified US involvement in the Israel-Iran conflict.
There is widespread concern over how these events will impact energy prices, product costs, and the current account balance.
The situation’s uncertainty continues to rise, prompting the Ministry of Finance to prepare scenarios to address potential challenges stemming from the Middle East. The government has assured that, depending on the unfolding developments, it will provide support to vulnerable social groups.
Surge in Oil Prices Leads to Higher Fuel Costs
Since the onset of the Israel-Iran war, international rating agencies have been assessing potential oil price trajectories in the event of a closure of the Strait of Hormuz. Predictions vary, with some forecasting prices might soar to $120 per barrel, while others estimate a price of $90.
The implications extend beyond just oil prices; they will undoubtedly affect fuel and other product costs. Gas stations are already charging higher prices for motor fuels, and this trend is expected to continue. Inflation has risen to 2.5% in May, up from 2% in April, driven by increases in basic food items, an 18% hike in electricity bills, an 11.1% rise in natural gas prices, and a 10.9% increase in rents.
Concerns are also mounting regarding electricity prices, with natural gas on the Dutch Stock Exchange trending upward. Environment and Energy Minister Stavros Papastavrou assured Ertntews that Greece’s energy security remains intact, adding that US involvement in the Israel-Iran war “marks a new chapter in an already unstable region.”
He emphasized that “Greece is part of a global economic and energy system, and obviously any significant global instability affects us.”
Tourism and Investment Concerns
Tourism presents another critical area of concern, as decreased tourist arrivals from Israel and potentially other countries might impact the summer season. Current data indicates a downturn in visits from Israel, but the overall effect on tourism in Greece remains uncertain.
The prolonged crisis amplifies uncertainties in trade flows, raises costs, and leads to delays. A significant risk involves a potential decline in Greek exports, compounded by raw material shortages and rising prices. Additionally, international instability tends to deter investors, making them more cautious during such volatile times.
