The armed conflict in the Middle East continues for the fourth day. And although analysts say it is too early to assess the scale of its impact, the energy, shipping and tourism sectors will be among the first in Cyprus to feel the effects of the US and Israeli military confrontation with Iran.
Cyprus once again turned out to be the EU country located closest to the combat zone. The Cypriot economy, which demonstrated financial stability in 2025, will have to adapt to uncertainty “imported” from abroad and revise plans for 2026.
Drone attacks (three drones arrived on March 2) on the British military base of Akrotiri amid the escalating armed conflict in the Middle East could lead to the fact that the economic consequences for the Cypriot economy will be more widespread than expected on February 28, the first day of the conflict.
ENERGY IS THE ACHILLES' HEEL
As Brief notes, one of the most real threats to the Cypriot economy is the rising cost of fuel that power plants need. Cyprus remains the only EU country energy isolated from the rest of the bloc. Rising prices for Brent oil will inevitably be reflected in the electricity bills of Cypriot consumers.
Fuel reserves in Cyprus will last for 15 days. As Dinos Lefkaritis, executive director of Petrolina, explained to Cyprus News Agency, before the start of the armed conflict the company bought fuel from an oil refinery in Haifa. In addition, Cyprus has the opportunity to purchase fuel in Greece, Malta and Italy.
The Republic of Cyprus has
strategic fuel reserves for 90 days
. This is a “locked” reserve, which is released only by government decision to prevent transport and economic paralysis in the event of a geopolitical crisis.
Fuel prices have begun to rise in Cyprus. On the morning of Tuesday, March 3, according to the website of the Ministry of Energy of the Republic of Cyprus, prices for 95 gasoline averaged
1,318 euros
per liter, on the 98th -
1,392 euros
, for diesel fuel -
1,417 euros
.
SHIPPING AND SUPPLY CHAIN
The Cyprus shipping cluster (more than 7% of GDP) is on high alert. Shipping companies are likely to see a sharp increase in insurance premiums for ships operating in the Persian Gulf and Red Sea due to the high risks.
With the closure of the Strait of Hormuz, “certain anomalies will arise in the supply chain and in the commercial activities of the country and beyond,” said Philokipros Rousounidis, secretary general of the Chamber of Commerce and Industry. This may lead to an increase in the cost of imported products.
INVESTMENT IN REAL ESTATE
— Coastal cities are expected to see a return to intense Israeli real estate activity, which has temporarily cooled, as Cyprus once again becomes an investment haven for funds from the Middle East seeking safety in the European Union, —
believes
Brief
.
INFLATION AND POSSIBLE SUBSIDS
Although inflation in Cyprus stabilized at 1.2% in January 2026, the new military conflict threatens to push it above 3%, reducing household disposable income.
Cyprus enters the crisis with a strong budget surplus (around 3%), which provides a cushion to cushion the initial shocks. However, a protracted conflict will force the government to return to horizontal subsidies for fuel and electricity, depleting reserves earmarked for development projects.
TOURISM: THE ISLAND AS A SAFE HARBOR
Some major tour operators in Europe are considering canceling package tours to Cyprus until the situation becomes clearer. Representatives of the island's hotel industry are concerned that the military operation against Iran coincided with the start of pre-bookings for Cypriot hotels.
Tourism is suffering a double blow. Firstly, Israel is the second largest supplier of tourists after the UK. Airspace closures will lead to massive flight cancellations for the spring season.
Secondly, the Estia plan has been activated for the reception and repatriation of foreign citizens through Cyprus. The challenge is to avoid perpetuating the image of Cyprus as a “war zone” in the eyes of European travelers.
