Irish consumers to lose €1,000 yearly due to Middle East war impact

Irish consumers are projected to lose at least €1,000 annually as a direct result of the Middle East war, with experts warning that the full economic impact is yet to be felt. Even if the recent US-Iran agreement holds, the conflict's lingering effects will continue to inflate prices for essential products like food, oil, gas, plastics, packaging, building materials, and fertilizer for months to come.

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The ECB has already hiked rates once and there’s a strong possibility it’ll hike rates another two times before the end of the year

Adding to these pressures, the European Central Bank (ECB) recently increased its interest rates, adding hundreds of euros to the cost of home loans for tens of thousands of mortgage holders. A further rate hike is considered likely within weeks, which would escalate costs for tracker mortgage holders and put pressure on homeowners with fixed or variable rate agreements later in the year.

Daragh Cassidy of bonkers.ie identified mortgage rates, energy prices, and food costs as the primary concerns for Irish households this year. He anticipates at least two more ECB rate hikes before year-end, potentially increasing monthly repayments for tracker mortgage holders by over €50, or more than €600 annually, on a €150,000 loan. Fixed mortgage rates for new customers are also expected to rise, impacting those nearing the end of their current fixed-rate terms.

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For someone with, say, €150,000 left on a tracker over 10 to 15 years, they could end up paying just over €50 a month extra on their repayments or over €600 a year

Simon MacAllister, co-head of geopolitical strategy at EY Ireland, warned that even a stable US-Iran deal would require months to restore oil and gas production to pre-war levels. The subsequent "resynchronization" of refineries could take up to a year. He highlighted that the increased costs of oil and gas translate to higher prices for plastics, packaging, and fertilizer, all components of the food and grocery sector. Products from seed to shelf are affected, from the diesel used for farming to the energy costs for processing and packaging.

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When we think about the impact, we’re talking about plastics and packaging and the components of fertiliser, all of which go into the food and grocery category

MacAllister also noted a likely spike in construction material costs, with some firms hesitant to price work due to sector-wide inflation. Cassidy echoed concerns about broader inflationary pressures, pointing to rising gas and electricity bills that could increase by over €300 annually for many households, with further increases anticipated.

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Products that were seeds when planted in the spring were planted using diesel that was more expensive and they were fertilised with fertiliser that has got more expensive