Alarm levels are rising in the government as potential escalation of tensions in the Middle East threatens to open new fronts with serious consequences for critical sectors of the Greek economy: tourism, energy, investments, trade, shipping, exports and the country’s overall growth prospects. Fears of a generalized conflict between Israel and Iran in a region crucial for global energy flows and maritime navigation bring back the nightmare of energy crisis and inflationary shock. The economic team remains on high alert, working on “plan B” scenarios using the €44 billion “ammunition” maintained in state coffers to shield households and businesses from new waves of price increases.
Although, according to Minister of National Economy and Finance Kyriakos Pierrakakis, uncertainty does not currently affect the Thessaloniki measures package, the emerging geopolitical risk scenario already weighs on growth forecasts, threatening the 2.3% growth target for 2025. According to estimates by the Piraeus Chamber of Commerce and Industry (PCCI), if the crisis extends for three months, direct economic losses for Greece could reach €2.1-2.6 billion, approximately 1% of GDP.
Economy: Inflationary pressures
Rising energy costs fuel broader inflationary pressures that spill over to supermarket shelves, transportation and basic goods. Family budgets are burdened again as consumers face new price increases in food, fuel and utility bills. The impact is even greater for low-income households, as a larger portion of their spending goes to inelastic needs. These concerns arise at a time when inflation showed new acceleration in May, reaching 3.3% according to Eurostat, up from 2.4% in May 2024, with increases hitting basic products from the household basket like food, bread, milk, fruits and coffee. Most concerning are the price increases recorded in electricity bills, which were inflated by 18% in that month. Meanwhile, natural gas charges reached 11.1%.
Fuel price concerns
Oil and natural gas prices are moving upward, directly affecting energy costs for businesses and households. Within the next few days, gasoline prices at many stations in mainland Greece are expected to exceed €1.80, while on the islands some stations are already close to €2. As electricity demand increases during summer months, electricity bills will be further burdened. Meanwhile, increases in gasoline and diesel prices lead to higher transportation costs and therefore more expensive tickets for trains, ships and airplanes.
Revenue threats
Air connections between Greece and Israel and scheduled arrivals for 2025 – with over 1.3 million available seats – are threatened by crisis escalation. Israel represents one of the fastest-growing tourist markets for Greece, with tourism revenues of €621 million in 2024. The loss of this stream, combined with potential psychological effects on travelers of other nationalities due to regional insecurity, could halt Greek tourism momentum, which contributes nearly 25% to GDP.
Maritime transport
Greek shipping, one of the most dynamic and strategic economic sectors, watches developments in the Strait of Hormuz with concern – a key point for transporting 20% of global oil. Any involvement or military presence in the area creates serious risks for maritime transport flows and dramatically increases risk premiums. Further crisis deterioration could lead to premium increases, route diversification and temporary suspensions in liquid fuel transport. This would negatively impact shipping company revenues and transport capabilities, especially in tanker and cargo ship sectors. For Greece, this translates to increased prices for imported products, possible delivery delays and export disruptions.
Published in Parapolitika
