Adds background in paragraph 2 and 3, fresh central bank quote in paragraph 4

STOCKHOLM, May 7 (Reuters) - Sweden's central bank kept its policy rate unchanged at 1.75% as expected on Thursday and said the risk that the war in the Middle East will lead to higher inflation had increased somewhat.

The Riksbank has been in wait-and-see mode since cutting by a quarter percentage point in September last year. However, while the policy stance hasn't changed, the economic context has.

While inflation is currently low, making Sweden an outlier in Europe, conflict in the Middle East has sent the price of oil soaring and raised concerns that inflation will pick up again.

"This means that there is scope to wait until there is a clearer picture of the effects of the war and the supply shocks it entails," the central bank said in a statement.

Analysts in a Reuters poll had been unanimous in seeing no change in the policy rate this time.

The median forecast in the poll was for rate-setters to hike first at the start of 2027, though markets see a high chance of tighter policy by year-end. 0#RIBA=