The Central Bank has warned that global risks to the Irish financial system arising from the Middle East conflict, artificial intelligence (AI), and cyber attacks have intensified.
In its latest Financial Stability Review, the financial regulator highlights several economic threats, led by a “persistent global energy supply shock triggered by the conflict in the Middle East”.
According to the review, if that situation “intensifies or continues for longer, it will push up inflation, slow economic growth and increase costs for Irish households and businesses”.
It also notes that Ireland’s dependence on imported energy and international trade means the country is “particularly exposed” to global developments.
Meanwhile, the Central Bank says valuations in the AI sector have “reached high levels”, noting an “increasing amount of investment in the sector funded by debt”.
So far for 2026, the level of debt finance for AI is already higher than any previous full year.
The regulator warns that any reassessment of the sector could have “wider economic effects”.
The review says that rapid developments in AI also raise concerns over the facilitation of cyber attacks.
Despite the increasing risks, the assessment from the Central Bank says Ireland’s financial system is “starting from a position of strength, but that resilience must be protected”.
It also notes that Government finances “remain strong, but there are underlying vulnerabilities” – including that budget surpluses “depend on corporation tax revenues”.
Without this revenue, the Central Bank says the budget balance is “projected to remain in deficit, leaving the State exposed if the global economy weakens or multinational activity is affected”.
Central Bank Governor Gabriel Makhlouf said the worsening geo-political situation is the risk he is most concerned about, because “we have no control over it”.
Mr Makhlouf added that “while we start from a strong position, today’s report shows Ireland faces intensified risks from the global environment.
“These include the energy shock, high valuations vulnerable to adjustment, and cyber and AI threats.”
The Governor said “preserving resilience is so critical right now,” which includes strong capital buffers in banks, prudent lending standards, and robust operational defences.