Many overlook the real problem What the Iran war is doing to your wallet is just the beginning
The conflict between the USA and Iran continues to keep the global economy on tenterhooks. Oil, transportation and energy remain expensive, inflation is rising again. What does this mean for Switzerland?
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- The conflict between the USA and Iran is weighing on the global economy far more heavily and for longer than initially hoped.
- While inflation is rising again worldwide and central banks are becoming more cautious, Switzerland remains comparatively stable for the time being thanks to the strong franc and low inflation.
- But even in this country, you have to expect long-term consequences.
Petrol, vacations, mortgages, rents: The conflict between the USA and Iran continues to keep the global economy on tenterhooks. Many experts had hoped that the conflict would only briefly disrupt the global economy. But the crisis is dragging on: oil and gas remain expensive, supply chains are disrupted and fears of a new wave of inflation are growing.
Can the global economy still recover from this? Or are we only at the beginning of the economic consequences? An overview of the most important developments - and the consequences for Switzerland.
What is the current situation in the conflict between the USA and Iran?
Although the USA and Iran are negotiating the opening of the Strait of Hormuz, the situation remains fragile. According to German chemicals manager Rainer Seele, even an opening would not immediately lead to normality: Supply chains would take months to recover, strategic reserves would have to be replenished and raw materials would remain in short supply until well into the end of the year.
In short, even a diplomatic breakthrough would not eliminate the price pressure overnight. The OECD therefore expects inflation of 4.0% for the G20 in 2026 - 1.2 percentage points higher than previously forecast. It is not expected to fall back to 2.7% until 2027 if the energy shock subsides.
So is the global economy facing a new crisis?
Not necessarily a classic financial crisis, but a dangerous mixture of weaker growth and higher inflation. This is precisely what is unpleasant for central banks. The European Central Bank (ECB) warns that the energy supply shock poses upside risks for inflation and downside risks for growth.
Will the mega-inflation of 2022 return?
Not one-to-one. Back then, the aftermath of the pandemic, the start of Putin's war against Ukraine, the energy crisis and supply chain chaos all came together. The current crisis is primarily affecting oil and gas.
But this shock can also spread. ECB chief economist Philip Lane warns that even if the war is resolved quickly, the current energy shock could have a prolonged impact on inflation, for example due to stockpiling and more expensive energy alternatives.
Is inflation now also rising sharply in Switzerland?
Probably not as much as in the eurozone. Switzerland has two protective factors: the strong franc and traditionally lower inflation. Nevertheless, experts expect Swiss inflation to rise to around two percent. However, this would still be within the SNB's target range of zero to two percent. There are currently no fears of a wage-price spiral.
And what does the global economic crisis mean for Switzerland in concrete terms?
Switzerland is better protected than many other countries - but it is not immune. The strong franc is dampening imported inflation. At the same time, however, Switzerland is feeling the effects of disruptions in exports, tourism, financial markets and supply chains.
Jan-Egbert Sturm, Director of the KOF Swiss Economic Institute at ETH Zurich, is therefore even warning of a loss of prosperity: more expensive energy makes income worth less, higher transportation costs make products more expensive, and weaker demand could also affect Swiss companies later on.
The "real problem" is therefore not the higher price of petrol per se, but a creeping loss of prosperity. The strong franc does protect us from some of the imported inflation. But Switzerland thrives on exports, open markets, tourism and a strong global economy. If Europe weakens, companies invest less and consumers become more cautious, sooner or later this will also affect companies and jobs in this country.
Does the SNB have to raise the key interest rate?
The majority of people do not currently expect it to. According to the UBS-CFA survey, two thirds of the experts surveyed expect key interest rates to remain unchanged when the Swiss National Bank (SNB) makes its next decision in June. The majority expect the key interest rate to remain at zero percent until the beginning of 2027, even if the probability of a rate hike has increased. The SNB will probably hold off on raising interest rates as long as inflation does not clearly rise above the target range.
What about mortgage rates? Will rents rise?
In the short term, there is unlikely to be any dramatic movement in the mortgage reference interest rate - which has been at an all-time low of 1.25 percent for a year now. Individual mortgages with a term of three to five years have already become slightly more expensive because the banks' refinancing costs are rising. However, the big interest rate shock has yet to materialize.
If the conflict continues for longer, a stronger jump in inflation is to be expected, which could also force the SNB to raise interest rates earlier than expected. "In such a case, the reference interest rate could rise as early as March 2027 or even December 2026," writes UBS.
However, the opposite development is also possible. Should an oil price shock lead to a recession, this could result in negative interest rates and keep the reference interest rate at its current level for even longer
In short, rents themselves are unlikely to rise in the short term. However, ancillary costs may increase - because heating oil, gas, electricity or general operating costs will become more expensive.
What does the war in Iran mean for Swiss tourism?
The summer is likely to be weaker: The war in Iran is hitting the Swiss tourism industry hard. BAK Economics expects a decline in overnight stays for the 2026 summer season for the first time since the coronavirus pandemic (by 1.0%).
Long-haul markets are particularly affected because flights are becoming more expensive and important hubs in the Middle East were temporarily impacted. According to the forecast, guests from India and South East Asia in particular will stay away. Although domestic demand is increasing somewhat, it cannot fully compensate for the shortfalls.
Despite the global crisis, share prices are rising: Why actually?
Because the markets are currently being strongly driven by the AI boom. The SMI, the Nasdaq and other indices have recovered significantly despite geopolitical risks. The SMI recently traded close to its all-time high again. At the same time, however, the fundamental outlook outside the technology sector has deteriorated.
This is not a contradiction, but actually a warning signal: the stock market is betting on the future of AI, while many other companies are already feeling the effects of higher costs and weaker demand. Many analysts also believe that the markets are currently massively underestimating the risk of permanently higher interest rates. Rising inflation, high oil prices and deteriorating public finances should actually be weighing much more heavily on valuations. The US Federal Reserve in particular could be forced to stick to a restrictive monetary policy for longer.
How is the US economy faring?
Inflationary pressure is also rising again in the US - and at the highest rate for three years. This is making it more difficult for the Fed to cut interest rates quickly. As long as energy prices remain high, the Fed is likely to remain cautious, even with its new chairman.
And what is the situation in the eurozone?
Europe is more vulnerable than the US because many industries are heavily dependent on energy prices and global supply chains. Reuters reports that the Iran war is causing costs to explode and is weighing on European industry. In Germany, industry stagnated in May, in France it even shrank.
The European Central Bank is therefore facing a dilemma. The economies in the eurozone actually need monetary policy support, but at the same time inflation is forcing the ECB to take a tougher stance.
With agency material.
