The Israel–Iran–USA conflict presents a triple threat: energy-related, inflationary, and monetary, which may become a real issue for Poland and Europe in the second half of the year, writes economist Piotr Arak for WNP Economic Trends. There are also hidden costs of war we must consider.

War in the Middle East: Oil Prices Rise, Inflation Awakens

Brent crude oil rose from about USD 65 in May to over USD 76 in June 2025—a 15% monthly increase—despite no physical disruption in supply. The fear of escalation near the Strait of Hormuz (through which 20% of global oil passes) was enough to trigger the spike.

For Poland, where fuel makes up about 8% of the inflation basket, this means a risk of reversing the disinflation trend. July CPI data may approach the upper bound of the 3.5% target, with inflation likely to rise further if energy prices follow oil’s path.

Russian Oil More Attractive Again?

Middle Eastern instability boosts the appeal of Russian oil for countries like India and China. Intermediaries may again try to bypass EU sanctions, increasing pressure on the EU’s energy policy. Russia still exports around 7 million barrels per day, potentially regaining ground as a “cheaper, though toxic” supplier.

This is a signal for Poland and Germany to accelerate diversification infrastructure—LNG ports and Baltic Pipe included—to avoid overexposure to geopolitical blackmail during future shocks.

Interest Rates: Pause Instead of Relief

In May, Poland’s CPI stood at 4% y/y, with core inflation at 3.3%, near the National Bank’s target. Yet rising fuel prices may shift expectations. The Polish Monetary Policy Council (RPP), already cautious about cuts, might fully pause the easing cycle. Forecasts for autumn cuts could prove premature, keeping rates at 5.25% longer.

Similarly, the European Central Bank had approached the end of its rate-cutting cycle (down to 2.15%), but global decisions will hinge on the U.S. Federal Reserve. Earlier, markets expected two cuts from the Fed in 2025; now, uncertainty reigns. If energy-driven inflation in the U.S. exceeds 2.5%, Jerome Powell may delay action, leaving rates at 4.5%—a challenge for U.S. debt sustainability.

Freight Insurance – The Hidden Cost of War

Another consequence of war is the surge in maritime transport costs. In June, insurance rates for tankers crossing the Strait of Hormuz tripled—from 0.2% to 0.6–0.8% of cargo value (Lloyd’s List). That means several million dollars extra per oil tanker—costs that will be passed to buyers, including European refineries and end consumers.

For Poland, which still receives about 20% of its oil by sea, this could drive up fuel prices, regardless of oil market quotations.

Markets Are Calm—for Now

Stock and bond markets remain calm, but unease is palpable. As in classic war films, the quiet before the storm is the most dangerous.

This week’s EU summit will address military spending. Europe can’t afford a strategic nap while wars are being fought over not just land, but also energy prices, exchange rates, and real incomes.

Ultimately—as always—consumers will foot the bill for global conflicts: in Poland, Germany, and France, not just in Tel Aviv or Tehran.

(wnp.pl)