{"id":469760,"date":"2026-05-27T16:06:08","date_gmt":"2026-05-27T16:06:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/469760\/"},"modified":"2026-05-27T16:06:08","modified_gmt":"2026-05-27T16:06:08","slug":"iran-war-shock-will-test-resilience-of-irish-borrowers-says-central-bank-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/469760\/","title":{"rendered":"Iran war shock will \u2018test resilience\u2019 of Irish borrowers, says Central Bank \u2013 The Irish Times"},"content":{"rendered":"

Central Bank of Ireland<\/a> governor Gabriel Makhlouf<\/a> has warned that the outlook for global energy prices is now closer to the \u201cadverse\u201d scenario the bank\u2019s forecasters set out in March, meaning Irish inflation<\/a> could accelerate above 3 per cent this year.<\/p>\n

On Wednesday, Central Bank officials said that the US-Israeli war on Iran<\/a> will test the resilience of Irish borrowers and the domestic financial system if a prolonged energy shock adds further fuel to inflation and continues to lower economic growth. <\/p>\n

In its first of two financial stability reports of 2026, the authority also highlighted the risk that runaway stock market valuations, particularly related to artificial intelligence (AI)<\/a>, amplify the risk of a \u201cdisorderly correction\u201d in global markets spilling over into the Irish financial system. <\/p>\n

Speaking to reporters on Wednesday, Makhlouf said the war in Iran and its effect on global energy and fertiliser markets was his top concern at the moment.<\/p>\n

\u201cI\u2019m worried about the geopolitical risks,\u201d he said. \u201cWe have zero control over that. [ …] Things have intensified, and it\u2019s not obvious today that there\u2019s a path to returning all of that to some sort of normality.\u201d<\/p>\n

In March, the Central Bank said it expected Irish inflation to average at 2.9 per cent this year, above the European Central Bank\u2019s 2 per cent target. <\/p>\n

However, it also outlined an \u201cadverse\u201d scenario in which a prolonged conflict dragged global energy prices even higher. In that scenario, inflation could reach 3.6 per cent this year, it said. <\/p>\n

On Wednesday, Makhlouf said the Central Bank will be updating its forecasts in June. \u201cBut it is reasonable to say at this stage that the duration of the conflict so far by itself would point to higher inflation in the near term, and closer to the adverse scenario.\u201d<\/p>\n

The Central Bank said the combination of higher inflation and lower economic growth could \u201ctest\u201d the resilience of Irish borrowers. Although levels of indebtedness are relatively modest, \u201ccredit growth has picked up, driven by mortgages\u201d, it said.<\/p>\n

The ECB is widely expected to increase interest rates at least twice this year in response to rising euro zone inflation. <\/p>\n

Mark Cassidy, director of financial stability at the Central Bank, said that 70 per cent of Irish mortgage holders are now on fixed rates. Two-thirds of them will be exposed to higher interest rates in the next two years.<\/p>\n

\u201cThe finances of households and banks remain resilient to the impact of both higher interest rates and higher energy prices, but that is not to underestimate the difficulties for some, and particularly for lower-income households,\u201d Cassidy said.<\/p>\n

Meanwhile, he warned that valuations in global stock markets are becoming \u201cincreasingly stretched\u201d as investors bet big on AI, pushing stock indices to fresh records in recent weeks. <\/p>\n

While recent shocks have not yet triggered a \u201cdisorderly correction\u201d in pricing and strong earnings growth has continued, an escalation in the Gulf could \u201cspark a sharp asset repricing\u201d through energy prices, supply chain disruptions and rising interest rates. <\/p>\n

\u201cI can\u2019t recall a time when we\u2019ve got this, as in the United States, really this sort of sheer optimism and boom \u2013 that\u2019s AI-driven \u2013 with the fact that elsewhere, we have these pretty severe shocks,\u201d Makhlouf said. \u201cIt\u2019s an unusual situation.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Central Bank of Ireland governor Gabriel Makhlouf has warned that the outlook for global energy prices is now…\n","protected":false},"author":2,"featured_media":469761,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[218,72,20927,943,113,28228,61,60,150432],"class_list":["post-469760","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-artificial-intelligence","tag-business","tag-central-bank-of-ireland","tag-cost-of-living","tag-economy","tag-gabriel-makhlouf","tag-ie","tag-ireland","tag-israel-iran-conflict"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/469760","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=469760"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/469760\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/469761"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=469760"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=469760"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=469760"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}