The Government warns of the impact of the Iran war on the Balearic economy: "It is a big stumbling block"

PalmThe Government still does not have a clear idea of the impact of price hikes due to the war in Iran on the economy of the Balearic Islands. Nevertheless, the first vice-president and Minister of Economy, Antoni Costa, has warned that it represents a "big stone in the road" after a 2025 in which figures indicated economic growth. The abrupt change in the international context has sown uncertainty in the Executive's forecasts, which has approved a first package of measures to address its first effects: the increase in prices of gasoline, transport, construction, and the rise in the Euribor. "Uncertainty and volatility are the two words that define the current situation," said Costa, who admitted that he still does not have the answer to the most important question: how will this situation affect the tourism sector?

The economy of the Islands grew by 3% in 2025, with a rate higher than that of Spain as a whole (2.8%), which is double the average of the European Union (1.5%). But since the outbreak of the war, this trend is in doubt. In a joint appearance, Costa and the Director General of Economy and Statistics, Catalina Barceló, have said that it is not ruled out that the economy will experience a moderation in its growth in 2026, which will result in an increase in inflation and the cost of living.

Regarding tourism, it has already been detected that long-distance routes to Asia are being reduced, as are medium-distance routes close to the war zone, while trips to the Caribbean and Latin America and short-distance flights are increasing. This, added to price increases, may discourage tourists from traveling to the Islands or lead them to make shorter stays. In fact, an increase in the price of kerosene has already been detected, which may have an impact on air transport prices, given that 85% of tourists arriving in the Islands do so by plane. But in parallel, the context may also end up favoring the Islands for being a consolidated and safe destination compared to other destinations with which it competes.

Goodbye to containment?

The Government had already renounced the major anti-saturation measures but, with the war, moderate tourist containment measures may also end up being shelved. The circumstances, Costa said, may end up forcing to "put the urgent ahead of the important". However, this will depend on the definitive impact of the war on the tourism sector.

In a report presented this Thursday, the Ministry indicated that the first indicators point to a moderation in the pace of activity, especially in variables linked to tourism and trade, although the labor market maintains a dynamic behavior, and construction continues to show positive evolution. Be that as it may, the rise in energy prices has been the most palpable effect so far. Brent crude oil has become significantly more expensive since the start of the conflict, with direct effects on fuels and transport. This fact, it said, could translate into upward pressure on inflation, after a period of moderation that placed the CPI at 2.2% in February 2026, before the start of the war. In fact, it is already beginning to show in the Euribor, which stands at around 2.8%, with an upward trend, and in the stock market, which is declining.

Letter to Madrid to request that insularity be taken into account

The Balearic Government has sent a letter to the Spanish government requesting specific measures to alleviate the price increase in the Islands. These would complement the anti-crisis decree approved for the entire State, in the same way as has been done with the Canary Islands. In the letter, signed by Costa and addressed to the Minister of Territorial Policy and Democratic Memory, Ángel Víctor Torres, the Executive asks for an analysis of "the mechanisms that can be enabled to address our insularity".