By Ed Frankl

Swiss inflation edged lower in June, the first decline since higher energy prices prompted prices to accelerate after the outbreak of the war in Iran.

The annual rate of inflation was 0.5%, lower than the 0.6% of both April and May, Swiss data agency FSO said Thursday. Inflation in the prior two months had been at its highest level since 2024.

Prices of petroleum products in June were up 15% on year, but had decreased since May, as had prices for air transport, which are particularly exposed to global prices of energy. Hotels and car rentals recorded price increases, FSO said.

Imported inflation declined to 0.2% from 0.7% in May, reflecting the fall in global energy prices. But domestic inflation, which takes in around three-quarters of the inflation basket, also edged down.

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. Inflation has nevertheless climbed from near-zero at the start of the year, and is now more comfortably stable in the Swiss National Bank's 0%-2% target range.

The rise in energy costs is also being countered by disinflationary pressures from the strong Swiss franc. Having spiked after the first military strikes on Iran, the franc weakened after the central bank said it was more willing to intervene in the foreign-exchange market to halt the strengthening of the currency.

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.

The small fall in annual inflation reinforces comments by SNB Chairman Martin Schlegel, who said at last month's monetary-policy meeting that medium-term inflation pressures have remained largely unchanged, despite the energy-price surge prompted by the Middle East conflict. The bank kept its key rate for a fourth straight meeting at 0% at the time.

Headline inflation is now set to edge down a bit further in the third quarter of the year, before it starts to gradually rise again toward the end of 2026, Pantheon Macroeconomics Europe economist Ankita Amajuri said in a note to clients.

"This is comfortably within the SNB's target band, and will therefore mean that the bank will leave rates unchanged throughout 2026," she added.

Write to Ed Frankl at edward.frankl@wsj.com