If geopolitics is a chessboard, in the conflict between the US and Iran, Bulgaria played the most paradoxical game. The country found itself in the role of two-faced Janus – on one side, the state and its strategic assets experienced a true renaissance, but on the other, the real business suffered a heavy economic knockout.
The rerouting of global energy and logistics routes during the closed Strait of Hormuz pulled the country out of the stagnant periphery of international politics and cemented it as a critically important, even indispensable, green and gas corridor of the European Union. Our country finally captured the long-awaited attention of Washington and NATO, becoming an anchor of stability on the Black Sea flank ahead of the key summit in Ankara.
Behind the facade of state triumph, however, a harsher reality lies for business. Because while state operators count record revenues from transit fees for Azerbaijani gas, the real economy pays the brutal tax of war – and both producers, traders, and consumers.
The new wave of shock inflation, dictated by rising fuel prices, squeezed the margins of Bulgarian companies to a minimum. It started with kilometer-long queues of trucks at the overloaded Kapitan Andreevo border checkpoint, which increased downtime, continued with expensive artificial fertilizers that further choked domestic agriculture, and reached frozen early bookings in tourism, leaving our sea with few foreign June tourists. The influence the state gained came out of the pockets of capital, which now expects a proper return from the budget. Prime Minister Radev's first meetings were with carriers after they announced they were ready for strike action. The Minister of Agriculture, in turn, began talks with the most affected producers and also promised compensation.
Official macroeconomic data from the Bulgarian National Bank (BNB), the Ministry of Finance, and international institutions like the OECD already outline the specific parameters of losses for Bulgarian business from the conflict in the Middle East.
Although the country avoided the most apocalyptic scenarios, the GDP growth forecast for 2026 was lowered to 2.5% (compared to the expected 3%), and annual inflation in the country is expected to accelerate to 4%. This means, besides reduced budget revenues, increased costs for materials and raw materials for companies, and thus squeezed profit margins.
The Bulgarian transport sector was the first to take the direct hit. Although gas station prices did not break historical records, the increase in diesel raised the cost of every route. Additionally, the rerouting of Asian cargo traffic entirely by land routes through Turkey led to critical congestion at the Kapitan Andreevo checkpoint. Bulgarian carriers lost tens of millions of leva weekly in idle hours at the borders.
Although Bulgaria secured alternative gas flows, the price of electricity and natural gas on the free market remained high, so metallurgy, construction materials production, glass and chemical industries in the country reported increased production costs and reduced competitiveness.
Since the Middle East is a leading exporter of raw materials for artificial fertilizers, the blockade of factories and ports in the Persian Gulf caused a new spike in the prices of nitrogen and phosphorus fertilizers. Bulgarian agricultural producers were forced to buy more expensive fertilizers at the height of the spring campaign, which raised the cost of domestic vegetable and fruit production at the end of the season, as well as grain.
Uncertainty in the Black Sea region due to the proximity of the conflict led to a temporary freeze on early bookings from Western Europe for the summer season on the Bulgarian Black Sea coast. The sea is unusually empty of German and Romanian tourists in June, and business is forced to rely on Last Minute offers and above all on domestic tourism, which reduces the planned revenues of hoteliers.
The only sector in Bulgaria that registered net profits during the crisis is energy infrastructure. State and private gas transmission network operators earned millions from transit fees due to record volumes of Caspian gas passing through interconnectors to neighboring countries.
The bottom line shows that unlike the state, which won strategic dividends from Washington and Brussels, private business in Bulgaria entirely bore the economic bill in the form of more expensive logistics and higher inflation. Which in turn reflects on reduced consumption and people's incomes.
