Japan’s economy grew at an annualized rate of 1.1% in the second quarter, falling short of the 2% growth economists expected.

Exports were the main driver of growth, helped by a weaker yen, while weaker domestic demand, consumption, and business investment weighed on the economy.

The quarter was the first to fully reflect the impact of the Iran war, which pushed energy costs higher for businesses and households.

The Bank of Japan expects moderate growth through the fiscal year but warned that elevated oil prices could slow the economy, CNBC has reported.

Economists also warned that rising costs and fading government support could increase inflation and further weaken consumers’ purchasing power.