Middle East war to push inflation higher, slow global growth: IMF
Synopsis
IMF says war-driven energy shock will push inflation up and weaken global growth.
The Middle East war inflation global growth IMF outlook has turned negative, with the global lender warning that rising energy disruption will push prices higher and weaken economic growth worldwide.
Key highlights
- IMF warns war will raise inflation and slow growth
- Oil supply disruption hits global energy markets
- Poor countries face the biggest economic risks
Energy shock drives economic risks
International Monetary Fund Managing Director Kristalina Georgieva said the conflict has caused severe disruption to global energy supply.
The closure of the Strait of Hormuz has blocked a key route for oil and gas shipments. This waterway carries about one-fifth of global energy trade.
As a result, global oil supply has fallen sharply. The IMF estimates a decline of around 13%.
Growth outlook set to weaken
The IMF is now expected to cut its global growth forecasts. At the same time, it will raise its inflation outlook.
Earlier, the Fund had projected global growth of 3.3% in 2026 and 3.2% in 2027. However, the war has changed that trajectory.
Georgieva said the outlook is now clear. All paths point to higher prices and slower growth.
Uncertainty clouds global economy
The war is expected to dominate discussions at upcoming meetings of the IMF and World Bank in Washington.
Moreover, the IMF will release updated projections in its World Economic Outlook on April 14.
Georgieva warned that the global economy is facing elevated uncertainty. In addition to war, risks include technology shifts, climate shocks and demographic changes.
Poor nations face biggest impact
Import-dependent economies are expected to suffer the most.
Many developing countries lack financial resources to cushion the shock. This raises the risk of economic stress and social unrest.
Notably, about 85% of IMF member countries are energy importers.
Georgieva said some countries have already approached the IMF for financial support.
Energy damage spreads across sectors
The impact is not limited to oil. It is spreading across supply chains, including fertilizers and industrial gases.
Even energy exporters are facing disruption. Iranian strikes have damaged infrastructure in countries like Qatar.
According to estimates, it could take several years to restore lost gas production capacity.
Food security risks emerge
Rising energy costs are also creating risks for food supply.
The IMF is working with the World Food Programme and Food and Agriculture Organization to assess the situation.
So far, a full-scale food crisis has not emerged. However, risks could increase if fertilizer supplies are disrupted.
What happens next?
Markets and policymakers will closely watch the IMF’s updated forecasts next week.
Even if the war ends soon, the economic impact is expected to persist. A prolonged conflict would further worsen inflation and growth.
FAQs
Q1: Why is the IMF warning about inflation?
Because the war has disrupted global energy supply, pushing oil and gas prices higher.
Q2: How will growth be affected?
Global economic growth is expected to slow due to higher costs and uncertainty.
Q3: Which countries are most at risk?
Energy-importing and developing countries face the biggest challenges.
Q4: Is there a food crisis risk?
Not yet, but risks could rise if supply chains for fertilizers are disrupted.
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