As widely expected, the Swiss National Bank (SNB) sees no need for action despite inflation concerns caused by geopolitical tensions and is keeping its key interest rate unchanged at 0%. The sharp rise in oil prices to over USD 100 per barrel is stoking new global inflation concerns and is a reminder of the situation in 2022/2023, when some regions temporarily experienced double-digit inflation rates and monetary policy measures were applied too late in certain cases. However, the current situation also differs significantly from the energy crisis back then. In 2022, several shocks overlapped: pent-up demand after lockdowns, disrupted supply chains, and soaring gas prices due to the war in Ukraine.

Until the onset of the Iran conflict, deflationary tendencies shaped Switzerland as a result of the strong Swiss franc, resulting in low inflation near zero. Compared to other central banks, the SNB is therefore in a relatively comfortable position, making a wait-and-see approach probably the best decision for the time being.

Downward pressure on inflation has eased

The question now is how persistent this new price pressure actually is. An inflationary surge due to higher energy prices would mainly increase import prices in Switzerland. This kind of inflation is less problematic and would, in part, be offset by a strengthening franc. Only if the price shock spills over into other segments through second-round effects and pushes up core inflation could monetary intervention make sense. Given that current inflation is at the lower end of the SNB’s target range of 0 to 2%, the SNB has sufficient leeway to wait and continue monitoring the situation.

What happens to Swiss interest rates?

The reaction of financial markets is also reflected in interest rate expectations. Since the outbreak of the Iran war, the Swiss interest rate swap curve has moved slightly higher in the short and medium terms, and the market is even pricing in a possible key rate hike to 0.25% by year-end. However, we see this as an overreaction and expect the policy rate to remain stable through the end of the year, as well as stable rates for medium and long-term maturities.

What happens to mortgage rates? Should you switch from SARON to a fixed-rate mortgage?

These expectations are already having tangible effects on the mortgage market. Fixed-rate mortgage rates have generally increased in recent weeks, and concerns that the SNB could raise key rates by the end of this year or early next year are prompting questions as to whether it is advisable to switch from SARON to fixed-rate mortgages. We recommend not making any hasty decisions and aligning your interest rate strategy with your own financial situation. As long as your circumstances do not change, it is advisable to maintain your current strategy.

Will the Swiss franc continue to appreciate?

In addition to the interest rate markets, the foreign exchange market is also reacting to the changing environment. In phases of increased risk aversion, capital typically flows into safe havens, and the Swiss franc remains one of the preferred target currencies in global financial markets. The SNB has once again verbally indicated possible currency interventions, but in practice, their impact is limited: even systematic foreign currency purchases can hardly change the franc’s trend direction in a meaningful way. The franc is therefore likely to remain at a high level.

What are the risks for the Swiss economy?

A strong franc cushions import-driven inflation but can weigh on export-oriented companies. In addition, there are real economic risks stemming from the conflict. The Swiss economy grew by 1.4% in 2025 and, according to the latest official forecasts, is expected to expand at a noticeably weaker pace of around 1% in 2026. A prolonged oil price shock would have global stagflationary effects – that is, it would dampen economic growth while pushing up prices – which would also be felt in Switzerland due to a weakened global sales market.

Current scenario models generally assume that the conflict will be relatively short-lived. Should this be the case, the impact on global inflation is expected to remain moderate, as many economies still have some spare capacity. Consequently, the additional burdens for Swiss growth would be limited, and the direct impact of higher energy prices on Swiss inflation would remain moderate.

What does this mean for investors?

As real as the economic risks may be, we recommend not making any hasty portfolio decisions. Geopolitical shocks create volatility. While this is unsettling, it is not a reason to capitulate. Although the current conflict differs from previous events due to the structural importance of the region for the global energy supply, geopolitical events tend to follow a recurring pattern: after initial price declines, stabilization generally follows, often with a recovery within a few months. Portfolio diversification remains essential during such times. History also shows that investors who stick to their strategy with discipline during periods of geopolitical uncertainty tend to achieve better long-term results than those who react to price declines with rushed sales.