Athens, Greece. Greece and Cyprus are especially exposed to geopolitical shocks from the Middle East because tourism and shipping play an outsized role in both economies, Morningstar DBRS said in a report.
Tourism and shipping exposure
Morningstar DBRS said disruptions to shipping and air travel are raising costs and weighing on both freight rates and tourist flows, with Cyprus viewed as more vulnerable due to its proximity to the conflict zone.
The agency said tourism and shipping carry far more weight in Greece and Cyprus than in most European Union economies. It said tourism’s importance is reflected in the large share of accommodation and food services in gross value added, with effects extending into transport, entertainment and private consumption. Shipping, while smaller than tourism in economic terms, remains significantly more important in both countries than in most of the bloc.
Banking-sector risks and buffers
The agency warned of rising credit risks for banks, particularly in Cyprus, where lenders have a heavier concentration of loans tied to tourism.
At the same time, it said banking systems in both countries remain supported by strong profitability and solid capital buffers, leaving them better placed to absorb a tougher operating environment.
Growth forecasts for 2026
Morningstar DBRS said recent developments are likely to hit tourism, which has been a key driver of growth in both economies in recent years, adding that the fallout is expected to be sharper in Cyprus because of its geographic closeness to the Middle East.
According to the Central Bank of Cyprus’ latest macroeconomic projections, real GDP growth for 2026 was revised down by 0.3 percentage points to 2.7 per cent, based on the assumption that the conflict would last around two months before gradually easing.
In Greece, the Bank of Greece estimates economic growth at 1.9 per cent in 2026, down from an earlier forecast of 2.1 per cent.
Shipping market disruption
The rating agency said the conflict and the effective blockade of the Strait of Hormuz following US and Israeli attacks on Iran have intensified disruption across shipping markets. It said tankers and container vessels are being forced to reroute, suspend bookings and absorb higher security and insurance costs.
How do you think prolonged disruption to air travel and shipping would affect Greece and Cyprus in 2026?
