Disruptions to oil and gas supplies will leave lasting “scars” on the world economy, managing director Kristalina Georgieva has said
The war in the Middle East has delivered a major global energy supply “shock” that will push up prices further and leave the world economy facing weaker growth, the IMF has warned.
The US-Israeli attack on Iran and subsequent Iranian retaliatory strikes across the region, including on energy infrastructure, have stressed global markets, driving oil prices higher and raising fuel costs. The conflict has effectively choked flows through the Strait of Hormuz, a key route that accounts for a significant part of global oil and gas supply.
IMF Managing Director Kristalina Georgieva said on Thursday that the turmoil amounts to a negative supply shock that is “large, global and asymmetric,” hitting countries differently depending on their reliance on imported fuel.
Global daily oil flows have fallen by about 13% and LNG shipments by some 20%, she said, warning that even the IMF’s “most hopeful scenario” now involves a “downgrade” to world growth.
“Had it not been for this shock, we would have been upgrading,” Georgieva said, adding that infrastructure damage, supply disruptions and loss of confidence will leave lasting “scars” on the global economy.
The conflict-related shock is already rippling through refineries, transport and food markets, the IMF said, citing shortages of diesel and jet fuel that have disrupted trade and tourism, and new bottlenecks in moving fertilizer and grain.
A further 45 million people have been pushed into food insecurity as a result of the escalation, taking the total number facing hunger to more than 360 million worldwide, according to the IMF.
The grim outlook comes as Washington and Tehran are expected to hold high-stake peace talks in Pakistan this weekend, after they agreed a two-week ceasefire late on Tuesday. Iran says any ceasefire must include Lebanon, which has been heavily bombarded by Israel this week. The scaled-up attacks, which killed hundreds and wounded more than 1,100, have raised concerns that the Iran ceasefire could be derailed.