TAIPEI (Taiwan News) — Taiwan’s Central Bank said Tuesday that oil price hikes driven by Middle East tensions are likely to be temporary and that it is closely monitoring inflation risks as global uncertainty continues.

According to the bank, four key inflation drivers remain under observation: global commodity prices, domestic service-sector trends, geopolitical instability, and weather conditions, per CNA. Officials said monetary policy will be adjusted as needed to maintain price stability.

Oil prices surged earlier this month following military clashes between Israel and Iran. While output from OPEC+ has generally kept prices lower this year, recent geopolitical tensions have fueled concerns over supply chain disruptions and dampened investment sentiment.

Still, the Central Bank views the current oil rebound as short-lived and unlikely to pose a significant threat to Taiwan’s consumer prices.

Regarding exchange rates, the bank said Taiwan’s economy has shown resilience during periods of Taiwan dollar appreciation. While exporters may face pressure, importers benefit from reduced costs, helping to offset the overall impact.

Over time, currency gains and losses tend to balance out, and NT dollar fluctuations should not pose major challenges to most industries, the bank said.

To help businesses navigate external risks, the bank urged continued government support for small and medium-sized enterprises and traditional industries with limited hedging tools. Stabilizing the foreign exchange market and promoting higher-value production will be key to enhancing global competitiveness, it added.