Economic experts warn of inflation risks from Iran conflict

Economic experts and financial institutions are warning that geopolitical tensions in the Middle East, specifically the conflict involving Iran, are driving up oil prices and creating significant inflation risks. Olli Rehn, Governor of the Bank of Finland and ECB Governing Council member, noted that while inflation has not yet spread widely beyond energy, vigilance is required as prolonged conflict could cause energy costs to permeate other sectors.

There are currently two opposing forces acting on the global economy: the war in Iran, which acts as a drag on growth, and the artificial intelligence boom, which supports it. While AI investments have increased demand for capital and contributed to rising long-term interest rates, the technology is seen as a potential tool to boost Europe's lagging productivity.

In the investment sector, S-Pankki reported that the ongoing conflict remains a primary source of market uncertainty. The bank's strategy involves increasing equity weightings while favoring emerging markets over Japan, driven by strong corporate earnings and the technology sector. Analysts suggest that if energy prices remain high, the deceleration of inflation may be delayed, potentially keeping interest rates elevated for longer than previously anticipated.