UPDATE 1-Swedish economy to face significant impact from Iran war but government stands ready to act, PM says

The Swedish economy will likely ​be significantly impacted by the conflict ‌in ​the Middle East, Prime Minister Ulf Kristersson said on Thursday, adding that solid state finances meant the government was ready to do more to support ‌the economy if necessary.

The right-wing government, which faces a general election in mid-September, has already moved to soften the blow from rising energy prices, introducing a temporary boost to electricity subsidies costing 2.4 billion crowns ($260 million), ‌and a cut to fuel taxes worth 1.6 billion. "We have both the readiness and the ability ‌to do more," Kristersson told a news conference on Thursday. "Our economy is in a state that will show that we have the room and muscle to do things if necessary."

Sweden, which has low national debt compared to most European countries, has also ⁠asked the ​European Union to approve a ⁠further cut in fuel tax worth around 8 billion crowns. Swedish central bank Governor Erik Thedeen said on Wednesday the risk ⁠had risen somewhat that inflation could be higher than the Riksbank expected a few weeks ago as the ​Middle East war causes a negative supply shock to the world economy.

While the outlook for inflation ⁠and growth has grown steadily more daunting, price rises remained subdued in March, data showed earlier this month, giving the Riksbank ⁠a ​bit more leeway in terms of monetary policy in the short term. Brent, the international crude oil benchmark, remained above $100 a barrel in Asian trade on Thursday, having hit triple figures a day earlier ⁠for the first time in two weeks.

Finance Minister Elisabeth Svantesson told the press conference that Sweden would need ⁠to cut energy ⁠use if the Middle East conflict was prolonged, but that gasoline rationing would not be the first measure to be introduced. "That's what we really want to ‌avoid, getting in ‌that situation," she said.