In the first half of the year, the economy was shaped by the closure of the Strait of Hormuz and the resulting significant rise in oil prices. However, the Swiss economy proved to be surprisingly resilient during this period. Despite the turmoil in the Middle East, the Swiss Purchasing Managers’ Index for manufacturing—the most important indicator of the state of the local industry—improved in the second quarter. This was partly because the rise in oil prices was significant, but not as sharp as feared at the start of the Middle East crisis. Additionally, oil prices now play a subordinate role for the Swiss economy, which limits the scope for economic damage.
US tariffs receded into the background in the first half of the year. On 20 February, the US Supreme Court declared the Trump administration’s tariffs invalid. These amounted to 39% for Swiss exporters from August to November 2025 and were reduced to 15% after tariff negotiations began. After the US court ruling, new tariffs of 10% were introduced on Swiss exports, which are valid for 150 days.
Tariffs back in the spotlight
On 24 July, the current tariff arrangements expire, and we believe it is likely the US government will introduce new ones. For the Swiss economy, tariffs of 15% like those in force before 24 February—would be manageable, but the US could also look to reimpose higher levies.
Besides tariffs, the situation in the Middle East remains fragile. We still expect the Strait of Hormuz to reopen fully in the coming months, as US President Trump will be keen to avoid a sharp rise in oil prices before the midterm elections in the fall. However, following a recent re-escalation with reciprocal strikes between the US and Iran, the path to lasting peace is proving to be bumpy. As a result, the second half of the year is likely to remain a challenging period for the Swiss economy, with growth continuing to lag behind the long-term trend.
While the next six months are likely to be turbulent on the growth side, the inflation outlook appears much calmer. The recent oil price spike only drove inflation from 0.2% in February to 0.6% in the early summer. With inflation risks seemingly under control, the Swiss National Bank has kept its key interest rate at 0%, and long-term interest rates have hardly moved. This combined with a sluggish growth outlook leads us to believe interest rates in Switzerland will likely remain unchanged for the remainder of 2026.
What does this environment mean for Swiss investors?
In the first half, equity markets rose despite geopolitical risks, and we see further potential for gains this year thanks to robust earnings growth. There are few alternatives for Swiss investors, as savings accounts hardly yield anything with interest rates at zero. Those seeking positive returns must engage in financial markets—especially in equities, since Swiss bond markets offer little in terms of yield. Nevertheless, we still think bonds belong in a portfolio, as broad diversification is the best way to benefit from investment opportunities while also mitigating risks.
