In a statement reflecting on the ongoing tensions in the Middle East, Latvian Bank President Kazaks expressed significant concern regarding the potential economic fallout from the conflict in Iran. He noted that military actions in the region are likely to drive prices up while simultaneously dampening economic activity. However, he remarked that the scale of this impact remains uncertain, hinging on the duration of the conflict and its effects on energy transport and production capacities.

Kazaks assessed that if the conflict escalates further and results in the destruction of industrial facilities, the long-term economic ramifications could be severe. He mentioned that under moderate impact scenarios, inflation in Latvia could see an increase of a few percentage points, albeit less sharply than the inflation spike seen due to Russia's invasion of Ukraine, which surged by as much as 20%. He reassured that while economic growth is projected to slow down again, it will not plunge into negative territory but rather reflect lower positive growth rates.

The most pronounced effects of the Iran war, according to Kazaks, will be felt in the oil market, suggesting that fluctuating oil prices will play a critical role in shaping overall economic conditions. He raised questions about the justification for the rising fuel prices in this context, indicating a need for careful scrutiny as the situation evolves.