The tense situation in the Middle East increases the likelihood that Armenia’s Central Bank may adopt a tighter monetary policy, according to a macroeconomic report by the Eurasian Development Bank (EDB), Sputnik Armenia reports.

The EDB recalls that at its June 17 meeting, the Central Bank of Armenia (CBA) kept the refinancing rate unchanged at 6.75%, citing price stability in unregulated services and easing inflation expectations as justification.

However, the regulator acknowledged growing risks of inflationary pressure should the Middle East conflict escalate or persist. Potential consequences include higher supply costs for goods and a decline in tourism flows if the region is perceived as unsafe. In such conditions, the Bank may need to curb inflation by raising interest rates.

Additionally, increased geopolitical tensions could impact Armenia’s investment appeal. Market participants may demand higher yields on Armenian securities due to heightened risk perceptions.

On June 13, Israel launched a large-scale offensive against Iran, accusing Tehran of nearing a point of no return in a military-oriented nuclear program. Targets included nuclear sites, military command, scientists, air bases, air defense systems, and surface-to-surface missile units. Iran, which denies pursuing a military nuclear agenda, responded with missile and drone strikes. On June 22, the U.S. bombed three nuclear facilities in Natanz, Fordow, and Isfahan, stating the aim was to severely damage or destroy Iran’s nuclear capability.