Iran Conflict Spurs Energy Price Volatility Impacting Swedish Economy

Recent military strikes by the USA and Israel on Iran have intensified concerns over economic repercussions in Sweden, particularly regarding energy prices. Claes Hemberg, an energy economist at Nibe, forecasts electricity prices in Sweden could rise by 10 to 20 öre per kilowatt-hour, while gasoline prices may increase by 1 to 2 kronor per liter as a direct consequence of the conflict. This turmoil stems from Iran potentially reducing its gas exports, pushing global gas prices higher and affecting electricity costs in southern Sweden.

The strategic importance of the Hormuz Strait for oil and gas transport compounds these challenges, as Iran has threatened to close it, fueling further price instability. Despite these pressures, the current mild winter weather in Sweden has somewhat softened the economic impact, with electricity prices showing a downward trend recently. Hemberg points out that the most severe price shocks occurred in January and February, and the market currently does not foresee a prolonged crisis.

Analyst Robert Bergqvist highlights that global markets opened under considerable strain following the attacks, with pre-existing nervousness adding to a fragile and stressed market environment. The tension leaves investors prone to negative reactions even from minor developments. Although the world is producing record levels of oil, market expectations are driving prices up, reflecting geopolitical risk rather than supply scarcity.

If the conflict escalates and prolongs, more significant consequences could emerge for energy prices and the global economy. Although a temporary dip in stock markets is anticipated, Hemberg downplays the risk of a crisis replicating past severe global market turmoil. Nonetheless, the ongoing instability underscores the sensitivity of Sweden’s economy to developments in the Iran conflict and the crucial role of energy markets in shaping economic outcomes.