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Cyprus Holds Steady Amid Strait Of Hormuz Tensions

Persistent Tensions In The Strait Of Hormuz

Tensions in the Strait of Hormuz continue to raise concerns for global shipping and energy markets. Despite the heightened geopolitical risks, Cypriot authorities and industry representatives say the developments have had little direct impact on Cyprus so far.

Minimal Impact On Cypriot Trade And Energy Supply

Cyprus has limited commercial and energy dependence on the Strait of Hormuz. Although several vessels, including ships flying the Cypriot flag, have been reported operating in the wider region, the main flows of oil and liquefied natural gas through the strait are directed primarily to Asian markets. As a result, the corridor does not constitute a critical supply route for Cyprus, either for imports or for energy security.

Close Monitoring By Shipping Authorities

Alexandros Iosephidis, general manager of the Cyprus Shipping Chamber, said the situation is being closely monitored. According to him, Cyprus’ direct exposure to developments in the region remains limited. So far, no disruptions have been reported in the country’s supply chains or maritime operations despite the continuing tensions in the Persian Gulf.

Assessing The Iranian Threat And Strategic Limitations

Iosephidis noted that some vessels and crew members managed by companies with a Cypriot presence operate in the region. However, none of these assets has been targeted in recent incidents. He also explained that Iran does not have the legal authority to block navigation through the Strait of Hormuz, although threats against vessels passing through the area have been reported. In response to the heightened risk, several shipping companies have temporarily redirected vessels or suspended transit through the strait.

Geostrategic Implications For China

Instability in the Strait of Hormuz carries broader global implications. China, which relies heavily on Gulf states for oil and gas supplies, could face significant disruption if maritime traffic through the corridor is affected. Any prolonged interruption to energy flows would likely influence global markets and could prompt diplomatic or economic responses from major energy importers.

Maritime Insurance And Rising Charter Rates

Growing security concerns have also affected the shipping insurance market. Some insurers have withdrawn war-risk coverage for vessels operating in the Persian Gulf, increasing costs for shipping companies. Charter rates have already reacted to the situation. According to LSEG, the benchmark daily rate for tankers transporting two million barrels of oil from the Middle East to China reached $423,736 per day. This represents an increase of more than 94% compared with levels recorded last week.

Ongoing Vigilance With Cypriot-Manned Vessels

The Ministry of Maritime Affairs has confirmed that 19 vessels flying the Cypriot flag are currently operating in the Persian Gulf. Authorities have reassured that both the ships and their crews are secure. It is important to note that these figures pertain exclusively to vessels registered under the Cypriot flag. Vessels managed by companies based in Cyprus but registered under other flags are not included in this count. The ministry continues close monitoring and maintains regular communication with the management companies overseeing these vessels.

Overall, while the escalating tensions in the Strait of Hormuz continue to cast a shadow over international maritime operations, Cyprus maintains a robust position with minimal direct exposure, ensuring that its trade and energy channels remain stable for the foreseeable future.

Bank of Cyprus Upgrade Signals Fresh Optimism For Greek And Cypriot Banks

Regional Banks Enter A More Favorable Cycle

Bank of Cyprus and Eurobank are well positioned to benefit from a renewed re-rating of Greek and Cypriot bank stocks, according to Cyprus-based investment firm Roemer Capital, which upgraded Bank of Cyprus to a buy rating and reaffirmed its positive view on Eurobank.

The firm cited easing geopolitical tensions, resilient economic growth in Greece and Cyprus, lower funding costs and Greece’s expected transition to developed-market status as the main factors supporting the sector.

Roemer Capital also lowered its cost of equity assumptions, updated its forecasts following first-quarter 2026 results and extended its valuation horizon to the end of 2027, raising target prices across its banking coverage.

Bank Of Cyprus Gets The Largest Upgrade

Bank of Cyprus received the biggest revision, with Roemer Capital upgrading the stock from hold to buy and setting a target price of €11.10, implying potential total upside of 27%.

The firm highlighted the bank’s strong capital generation, profitability and projected 100% dividend payout, describing it as the strongest capital-return story among the banks under coverage. Roemer Capital maintained its buy rating on Eurobank, assigning a target price of €4.90 and forecasting potential upside of 28%. The report said the bank is well placed to benefit from loan growth, improving operating performance and merger-and-acquisition synergies.

National Bank of Greece and Piraeus Bank also retained buy ratings, with expected returns ranging from 25% to 36%. Optima Bank was upgraded to buy, while Alpha Bank remained at hold on valuation grounds.

Why Growth Still Sets The Region Apart

According to Roemer Capital, Greek and Cypriot banks continue to benefit from stronger economic fundamentals than many western European peers. The report pointed to faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital ratios approaching 20% and strong customer deposit bases.

Analysts expect performing loans across the sector to grow at a compound annual rate of 6% to 8% through 2028, supported by private investment, digitalisation, green manufacturing, supply-chain expansion and a gradual recovery in household lending.

The report also said the conclusion of lending under the EU Recovery and Resilience Facility is unlikely to materially affect credit growth, as banks have already shifted back towards traditional commercial lending. Roemer Capital expects Euribor to remain between 2.2% and 2.5%, a level it believes should support both lending activity and net interest margins.

Geopolitics, Valuation And Market Structure Support The Case

The report said improving geopolitical conditions have strengthened the investment outlook, noting that Brent crude prices have largely returned to pre-war levels while Greek government bond yields have stabilised at around 3.5%. Although geopolitical risks remain, Roemer Capital believes the likelihood of a major inflationary shock or significant pressure on bank profitability has eased.

Another important catalyst identified by the firm is Greece’s expected promotion to developed-market status by FTSE Russell, STOXX and MSCI over the coming months.

According to the report, the reclassification should improve liquidity and attract a broader base of international investors. Roemer Capital also said Euronext’s acquisition of the Athens Exchange is expected to strengthen market infrastructure and increase international visibility, particularly for Bank of Cyprus and Optima Bank.

The firm noted that Bank of Cyprus has already benefited from its Athens listing, with average daily trading value increasing from less than €400,000 before its September 2024 move to nearly €6 million afterwards.

Economic Momentum Remains A Core Tailwind

Roemer Capital said both Greece and Cyprus have moved beyond post-crisis recovery and are now supported by private-sector-led growth. For Cyprus, the report highlighted recent tax reform and efforts to simplify the legal and regulatory framework, while also noting that limited foreign banking competition continues to support domestic lenders.

Overall, Roemer Capital expects Greek and Cypriot banks to remain well-positioned for profitable loan growth over the coming years.

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