Uncertainty surrounding Switzerland’s economic outlook has increased, largely due to the Middle East conflict, with global developments now seen as the primary risk to inflation, according to minutes from the Swiss National Bank’s (SNB) latest policy meeting released on Thursday.

In March, the SNB left its policy rate unchanged at zero amid concerns linked to the Iran conflict, and indicated a stronger willingness to step into currency markets to counter a surge in the Swiss Franc driven by safe-haven demand during the turmoil, Reuters news agency reports.

“The main ​risk to the economic and inflation outlook for Switzerland stems from developments in the global economy,” according to the SNB minutes. “In particular, the war ​in the Middle East could curb economic activity more ​strongly and increase upward pressure on the Swiss Franc.”

In early March, the Swiss Franc rose to an 11-year high against the Euro, driven by strong inflows as investors sought safety amid the US-Israeli conflict with Iran.

As per the meeting minutes, given the geopolitical tensions and the resulting flight to safe-haven assets, the central bank should maintain a high level of readiness to intervene in foreign exchange markets to prevent a sharp and excessive appreciation of the Franc, which could threaten price stability in Switzerland.

On Wednesday, SNB Chairman Martin Schlegel stated that uncertainty surrounding Switzerland’s inflation outlook is “quite high,” adding that it is important to closely monitor whether the effects of the Middle East conflict lead to second-round impacts on prices.

Furthermore, although Switzerland’s near-term economic outlook remains uncertain and growth may stay relatively weak in the short term, prospects are expected to improve over the medium term, the minutes stated.

GDP is forecast to grow by about 1% in 2026 and around 1.5% in 2027.

While the output gap is currently negative, due to the drop in GDP in the third quarter, it is anticipated to gradually close over the coming quarters.