The US-Iran agreement marks an important development for energy markets and global trade, although inflationary pressure is expected to remain in place for some time, according to University of Cyprus economics professor Marios Zachariades. 

Speaking to the Cyprus News Agency (CNA), Zachariades said the agreement had already led to a sharp fall in international Brent crude prices, a move which should gradually be reflected at petrol stations in Cyprus over the coming weeks. 

“There is already a huge drop in the international price of Brent oil, and this should be transmitted slowly to gas stations in the coming weeks,” he said. 

However, he warned that the effect on food production, transport costs and wider consumer prices would take longer to become visible, as higher energy prices had already fed into production and supply chains. 

“But we will see a more immediate reduction in gasoline at gas stations in the coming weeks, logically based on what we see in international markets,” he added. 

Asked about the wider economic impact of the US-Iran agreement, Zachariades described it as a significant step, but stressed that it does not fully remove uncertainty. 

He said the agreement amounts to a temporary two-month ceasefire accompanied by negotiations, meaning that markets and policymakers will continue to monitor developments closely. 

“The important thing, however, is that the Straits of Hormuz are opening,” he said. 

“However, it will not happen today, a process is needed to find the mines, for example, which will take some time,” he added. 

Oil prices, he continued, had remained high for a prolonged period, but have now dropped below 80 dollars per barrel of Brent. 

As oil traffic begins to normalise in the coming weeks, this is already placing downward pressure on crude prices. 

Nevertheless, Zachariades said the recent period of elevated oil prices had already affected the cost of other products, as well as their production and transportation. 

“However, because oil prices had remained high for a prolonged period, other products, their production, their transportation have already been affected, with the result that there are already inflationary trends that do not suddenly stop with this agreement,” he said. 

For Cyprus, the issue is particularly important, as the country continues to record stronger growth than the eurozone average, while inflation expectations among both households and businesses remain high. 

Zachariades said this alone could keep prices under pressure in the coming period, as expectations of higher inflation often feed into actual price-setting behaviour. 

“A big problem in general in the global economy and in the European one is that inflationary expectations have already risen, people expect higher inflation, households, businesses,” he said. 

“Cyprus is an example where households and businesses are indeed expecting higher inflation, an even higher price trend, and this in itself is going to push prices up in the coming period in Cyprus,” he added. 

More broadly, he explained that prices for a range of products had already risen because of higher oil and raw material costs, with these increases now reflected in consumer and business expectations. 

As a result, he said, inflationary pressure will take time to ease, even if the situation around the Strait of Hormuz is resolved in the coming months. 

“So it will take time for the economy to normalize in terms of inflationary trends even if the problem is finally solved in the coming months with the Strait of Hormuz,” he said. 

Zachariades also referred to the European Central Bank’s (ECB) recent decision to raise interest rates in an effort to curb inflation. 

He said another increase may be needed in 2027, depending on how inflation expectations evolve, although the pressure may now be less severe than it would have been had the situation in Iran continued. 

“There will not be a huge improvement in the next few months, perhaps towards the end of 2027, beginning of 2028, we will see a better horizon in terms of inflation, but not at this time,” he said. 

Zachariades concluded by saying that global events often leave a lasting mark on economic conditions, while Europe continues to face the double challenge of persistent inflation and weak growth.