Middle East tensions could slow Swiss economy, fuel inflation: Report

Rising tensions in the Middle East and soaring energy prices are expected to slow Switzerland’s economy and increase inflation, economists at the UBS bank warned in a study reported Tuesday by Swissinfo.

According to the report, a prolonged conflict involving the US and Iran could drive oil prices above $150 a barrel, reviving fears of recession and creating major risks for the Swiss economy.

“The increase in the price of petroleum products such as petrol and heating oil is currently costing Swiss consumers around CHF170 million (over $215 million) a month,” UBS economists Alessandro Bee and Matteo Mosimann said in the study.

They noted that consumer morale weakened sharply in March and April, falling to its "lowest level in nearly two and a half years" as fuel prices increased.

The economists said they expect global oil supplies to normalize in the second half of the year if tensions between Washington and Tehran ease.

Even under that scenario, however, “the Swiss economy is likely to suffer, although this remains manageable,” the study warned.

UBS lowered its Swiss growth forecast for 2026, now expecting gross domestic product growth adjusted for sporting events to reach 0.7%, down from the 0.9% projected before the conflict escalated in late February.

The bank also raised its inflation outlook, forecasting consumer price growth of 0.6% this year and next.

The economists warned that a prolonged closure of the Strait of Hormuz could trigger "a sharper slowdown in growth, or even a recession in the event of an oil shortage" in Switzerland.