Swiss inflation fell in July despite a rebound in global energy prices following a flare-up of conflict in the Middle East, which has driven up inflation in other parts of Europe.

The annual rate of inflation was 0.4%, down from 0.5% in June, Swiss data agency FSO said Monday. This marks the lowest rate of inflation since March.

The FSO said the on-month decline was driven by lower prices for air transport, diesel and petrol, though heating oil prices rose.

Last week, data showed inflation in the eurozone rebounding in July as energy costs accelerated again following elevated hostilities between the U.S. and Iran.

"We expect inflation pressures to persist in the Swiss economy, with hostilities in the Middle East resuming and global energy prices rebounding," analysts at Pantheon Macroeconomics said in a note.

Still, Pantheon expects inflation to hold well below 1.0% until the end of 2027.

Switzerland is less exposed than some of its European neighbors to swings in energy prices, given its more diverse energy mix that features hydroelectric dams and nuclear power. Still, inflation has jumped from close to zero at the beginning of 2026 to a peak of 0.6% in April and May--its highest level since 2024.

Despite the jump, inflation remains within the Swiss National Bank's 0%-2% target range.

The SNB kept interest rates on hold at a meeting in June. Chairman Martin Schlegel said at the time that medium-term inflation pressures were largely unchanged.

Schlegel also outlined an increased willingness to intervene in the foreign-exchange market if needed to counter excessive strength of the Swiss franc, which appreciated following the first military strike on Iran, adding disinflationary pressures to the export-oriented economy.

The franc's status as a safe-haven currency means it appreciates at times of geopolitical turmoil, which pushes down the price of imported products and services.

However, the franc weakened following Schlegel's comments and an interest-rate hike by the European Central Bank in June, easing disinflationary pressures.

"Swiss policymakers remain in a comfortable position, with inflation under control and economic growth largely unaffected by the energy shock so far," analysts at Pantheon said, adding that they expect the SNB to keep interest rates on hold at 0.00% this year.