His comments in Dublin were made at the same time as new figures were released showing inflation in this country spiked this month due to soaring energy prices.
Dr Lane said that it was likely the situation in the Middle East will “shift to a calmer situation within a short amount of weeks”.
But even if that happens there will still be longer-term implications of the war on the European and global economies.
“Now that we’ve seen the Strait of Hormuz being closed down and many Gulf nations being pulled into the hostilities, I think they will have longer-term implications even if the immediate issue is cast out,” he said on Monday’s ‘Today with David McCullagh’s RTÉ programme.
Dr Lane, who is the former Governor of the Irish Central Bank, warned that if there is no resolution to the conflict then the ECB will be forced to push up interest rates strongly to get inflation under control.
He did not specify what that would mean in terms of rate rises.
Markets are betting on as many as three rate rises this year, with the first as early as next month in a bid to control price rises.
Inflation in this country jumped to 3.6pc in the year to this month after petrol, diesel and home-heating oil costs all surged after the attacks on Iran by Israel and the US.
The so-called “flash” estimate for March inflation published by the Central Statistics Office (CSO) shows the price rises were mainly due to energy costs vaulting higher.
The flash estimate for the harmonised index of consumer prices (HIPC) rose by 1.8pc between February and March, the CSO said.
Inflation, as measured by the harmonised index, had been 2.5pc in February.
Today’s news in 90 Seconds – Tuesday, March 31
The harmonised index is different to the CSO official Irish inflation measure, called the consumer price index.
The harmonised index excludes mortgage interest repayments, motor tax, home insurance (building and contents), and property tax.
CSO statisticians said energy prices jumped by 11pc in March, and were up by 12.3pc in the year to March.
Food prices are estimated to have decreased by 0.3pc in the last month, but they went up by 2.3pc in the last 12 months.
CSO statistician Anthony Dawson said there was a spike in energy costs this month.
“These increases in energy prices may have been influenced by recent events in the Middle East. These prices were collected in mid-March and before the Government measures on energy costs were introduced,” he said.
The index excluding energy and unprocessed food prices, is estimated to have gone up by 2.6pc since March 2025.
Motor fuel and heating oil prices have rocketed as a result of the Middle East conflict.
It currently costs around €1,670 for 1,000 litres of kerosene, up from around €1,000 before the outbreak of hostilities.
Diesel prices at the pumps have zoomed up to around €2.30 a litre, before the Government reduced the excise duty by 20c a litre.
And 15c came off the litre of petrol as it shot up to more than €2.00 a litre in many forecourts.
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