Middle East war ‘risks slowing Swiss economy’

The Strait of Hormuz is key to expectations Keystone-SDA

The Middle East conflict, along with soaring oil and gas prices, are likely to slow the Swiss economy and accelerate inflation, according to projections from UBS bank economists.

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If the war between the United States and Iran drags on, oil prices are likely to soar above $150 a barrel, reviving fears of recession.

“The increase in the price of petroleum products (such as petrol and heating oil) is currently costing Swiss consumers around CHF170 million a month. This corresponds to less than 0.5% of their expenditure,” stated Alessandro Bee and Matteo Mosimann in a study published on Tuesday.

+ Read about our coverage of the Middle East conflict

Faced with soaring prices at the pump, “consumer morale suffered in March and April, falling to its lowest level for almost two and a half years. On the other hand, the rise in oil prices has so far had little impact on industrial morale”, they added.

With the prospect of an imminent easing in the conflict between Washington and Tehran, UBS expect global oil supplies to return to normal in the second half of the year.

But even in this scenario, “the Swiss economy is likely to suffer, although this remains manageable”, the study warned.

+ Swiss fuel shortage ‘very likely’, warns trading expert

The economists have therefore scaled back their growth forecasts for Switzerland this year and next. In 2026, they now expect a rise in gross domestic product (GDP), adjusted for sporting events, of just 0.7%, compared with +0.9% in their projections made before the start of the war at the end of February. Real wages are expected to rise by 0.6%.

In 2027, GDP should accelerate by 1.4%, after expectations of +1.5% previously. “The German tax package should boost confidence in the second half of the year and especially in 2027. The Swiss economy could also benefit from this,” said Bee and Mosimann.

Cancellation of US attacks

Inflation is now expected to be 0.6% this year and next, compared with a 0.3% acceleration in consumer prices in 2026 in the previous estimates.

But if the Strait of Hormuz were to remain closed for an extended period, “the Swiss economy could experience a sharper slowdown in growth, or even a recession in the event of an oil shortage”, they warned.

+ Switzerland’s fossil fuel dependence explained

In such a scenario, the Swiss economy “would face much higher inflation and much weaker growth prospects”. Economists at Switzerland’s largest bank do not rule out a spike in oil prices to over $150 a barrel, in the event of “friction on the oil market” leading to “energy shortages or even blackouts”.

After a joint American-Israeli attack on Iran at the end of February, followed by Tehran’s retaliation with missiles and drones in the region, the warring parties have been observing a fragile ceasefire since the beginning of April.

Blowing hot and cold, US President Donald Trump announced on Monday that he had abandoned his planned attack on Iran on Tuesday and said that “serious negotiations” were taking place.

He went on to say that he had a “very good chance” of reaching an agreement with the Islamic Republic. But he also said that Washington was ready to launch “a full-scale, all-out attack” on Iran “if an acceptable agreement is not reached” with Tehran.

Adapted from French by AI/mga

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