Homes and businesses face rising food and electricity bills as energy prices increase on the back of the Middle East conflict, says the latest assessment of the Irish economy.
The economy on both sides of the Border will grow this year, but uncertainty created by the US-Israel-Iran conflict increases risks, according to the EY Economic Eye Spring Forecast.
Petrol, diesel and home heating oil prices rose after Iran shut the vital Strait of Hormuz shipping lane in retaliation for US-Israeli strikes, hitting energy production and supply chains.
“Households are likely facing increases in their grocery as well as their electricity and gas bills in the months ahead,” says the forecast, published on Tuesday.
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Inflation in the United Kingdom is also rising alongside higher fuel prices, with regulated household energy bills expected to increase in July, it notes.
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EY is assuming that oil prices will moderate in the second half of this year, but remain above pre-conflict levels.
The firm’s report cautions that uncertainty and risks remain, with more “adverse energy scenarios possible”.
EY’s report comes following the weekend’s news that PrepayPower would increase domestic electricity and gas prices, with others likely to follow.
Energy industry sources predicted in April that suppliers could begin boosting household charges this month and in June.
Global gas prices have risen sharply since the war began on February 28th. The State relies on the fuel to generate about half its electricity and imports 80 per cent of its needs.
“The second global energy price shock of the twenty-twenties is putting upward pressure on inflation in Ireland, and growth is expected to moderate this year, following a strong performance in 2025,” noted the report’s author, Loretta O’Sullivan, chief economist and partner, EY Ireland.
Brent crude futures, one of the global benchmarks for oil, rose $5 (€4.27) early on Monday to $113.65 a barrel following reports that Iranian forces had struck a US naval vessel in Hormuz. US authorities subsequently denied the claim.
EY believes that the Republic’s economy will grow 1.8 per cent this year, while the North will expand by about 0.7 per cent. The firm cautions that activity will drag if prolonged conflict in the Middle East keeps oil and gas prices high.
The firm predicts that euro zone inflation could reach 2.8 per cent this year. It also says that a protracted conflict that keeps oil above $100 a barrel increases the likelihood of a global recession. EY says the odds of this occurring are about 35 per cent.
O’Sullivan dubs 2026 the year of global energy volatility.
“Combined with the impact of the conflict in the Middle East on the global energy market and the world economy, we are projecting more moderate but still decent growth this year, something many of our peer nations will not be expecting,” she said.
“Consumer spending is a key indicator of the health of the domestic economy and even with the significant energy price impact we are still forecasting this to increase this year and next.”
