KEY POINTS
- Rising energy prices above $100 per barrel could significantly increase global inflation and reduce economic growth.
- The Iran conflict is disrupting oil, gas, and fertilizer supplies, raising risks for both energy and food prices.
- The IMF urges central banks to stay alert as market volatility rises and global economic uncertainty deepens
The International Monetary Fund, IMF, has raised concerns that a sustained surge in global energy prices could drive inflation higher and weaken economic growth worldwide.
The warning comes as escalating tensions linked to the Iran war continue to disrupt oil and gas supply chains. The conflict has significantly affected seaborne energy shipments, pushing Brent crude oil prices above $100 per barrel after rising more than 50% in recent weeks.
According to IMF estimates, every sustained 10% increase in energy prices could raise global inflation by about 0.4 percentage points. At the same time, global economic output could decline by between 0.1% and 0.2%.
This means that if oil prices remain elevated above $100 per barrel for an extended period, the world economy could face a combination of higher living costs and slower growth, a scenario that poses challenges for both advanced and emerging markets.
In addition to energy, disruptions to fertilizer shipments and transportation networks are increasing the risk of rising global food prices, further compounding inflationary pressures.
IMF to update global outlook in April
The IMF says it is closely monitoring developments and will incorporate the full impact of the conflict into its next global economic outlook, expected to be released during the IMF-World Bank Spring Meetings in April.
The institution noted that the scale of the economic fallout will depend heavily on how long the conflict lasts, how intense it becomes, and how widely it spreads.
The IMF has advised central banks worldwide to remain vigilant, particularly in monitoring whether inflation spreads beyond energy-related costs and whether inflation expectations remain stable.
Financial markets have already reacted to the uncertainty. Stock markets have declined, bond yields have risen, and currency volatility has increased. The U.S. dollar has strengthened, while several emerging market currencies have weakened.
The IMF’s preliminary assessment suggests that growth in Gulf Cooperation Council countries may weaken, largely depending on how quickly oil and gas exports can resume.
The conflict has already had a major impact on energy infrastructure. Attacks have reduced Qatar’s liquefied natural gas export capacity by about 17%, resulting in an estimated $20 billion in annual revenue losses and threatening energy supplies to Europe and Asia.
