The US–Iran agreement to de-escalate tensions in the Middle East is already reshaping market expectations, driving oil prices lower and improving the outlook for both the global and Cypriot economies, according to economist Tassos J. Yiasemides, who cautions that the scale of the gains will hinge on how durable and effectively implemented the deal proves to be.
According to Yiasemides who spoke to CBN and InBusinessNews, the preliminary agreement reached between the United States and Iran is one of the most significant geopolitical developments, as it directly affects the stability of the Middle East, a region that plays a decisive role in the global energy market.
As he explained, markets reacted positively to the development, estimating that the risk of new conflicts and disruptions in international energy flows is decreasing. “As a result, oil prices declined, while optimism about the course of the global economy strengthened.”
Energy and inflation
Asked about the benefits of the agreement, he stated that “the main economic benefit is linked to the reduction of uncertainty around the Strait of Hormuz, through which a significant share of global trade in oil and liquefied natural gas passes.”
“Over recent months, geopolitical tensions had driven energy prices up, as markets feared potential disruptions in the supply chain,” he added, stressing that “with the agreement, these fears are easing, and investors estimate that oil supply will remain smooth, while it may increase further if sanctions limiting Iranian exports are relaxed.”
Regarding inflation, Yiasemides noted that “this de-escalation has direct effects,” reminding that “energy is a key factor in shaping production costs, transportation, and business operations.”
“When oil and natural gas prices decline, pressure on the prices of goods and services is reduced. This creates more favorable conditions for central banks, which may avoid further interest rate hikes or even consider more supportive policies for economic growth,” he further pointed out.
He also estimated that “the full normalization of the situation, with the rescheduling of tanker routes, will require a significant amount of time,” while noting that “the stance of insurance companies will be of particular interest, as their caution regarding navigation in the region may continue to create problems in the flow of goods.”
Additionally, he said, the potential lifting of sanctions on Iranian oil exports is expected to further increase supply in international markets.
The benefits for the Cypriot economy
Asked whether Cyprus will also benefit from the agreement, the economist indicated that these developments are particularly important for the country.
As he explained, “the Cypriot economy remains largely dependent on imported fuels for electricity generation and transportation.”
Therefore, any decline in international energy prices translates into lower costs for households and businesses. “Consumers can benefit from reduced spending on fuel and electricity, while businesses gain greater room for growth thanks to lower operating costs,” he stressed.
At the same time, he added, “stability in the wider Eastern Mediterranean region strengthens the investment climate and creates positive prospects for shipping, tourism, and services—sectors that are key pillars of the Cypriot economy,” while estimating that “a reduction in geopolitical risks usually increases investor confidence and encourages economic activity.”
“It should be noted that the benefits will depend on the duration and effectiveness of the agreement. If the commitments of both sides are fully implemented and stability is maintained in the region, the positive effects on the economy and energy prices could be significant. Conversely, any resurgence of tensions could quickly reverse the favorable climate,” Yiasemides concluded.
