THE International Monetary Fund (IMF) has warned that a sustained surge in energy prices driven by the ongoing conflict in West Asia could push global inflation higher and dampen economic growth, as disruptions to oil and gas supply continue to ripple through markets.
Speaking through spokesperson Julie Kozack, the Fund said the overall economic impact will depend largely on the duration and intensity of the conflict, while identifying several key channels through which the shock is being transmitted across the global economy.
She said the IMF is monitoring commodity prices, inflation and inflation expectations, as well as broader financial conditions, as part of its assessment of the evolving situation.
Kozack noted that significant disruptions are already evident, including constraints on energy flows and damage to critical infrastructure across the Gulf region.
She pointed in particular to the closure of the Strait of Hormuz, which has restricted access to around 20 per cent of global oil supply and seaborne liquefied natural gas shipments, alongside damage to production facilities in Iran and neighbouring areas.
She said the impact on commodity prices will depend on how long such disruptions persist and the extent of damage to hydrocarbon infrastructure.
According to her, oil and natural gas prices have risen by more than 50 per cent over the past month, with additional pressures emerging from disrupted fertiliser shipments and wider transport bottlenecks that could feed into higher food prices globally.
She cautioned that persistently elevated energy costs would lift headline inflation and could lead to broader price increases through second-round effects, making inflation expectations a key variable for policymakers to monitor.
Kozack added that historical evidence suggests that a sustained 10 per cent rise in oil prices could increase global headline inflation by around 40 basis points, while reducing global output by between 0.1 per cent and 0.2 per cent.
She also highlighted tightening global financial conditions, noting declines in equity markets and rising bond yields across major economies including the United States, the United Kingdom and Europe.
Similar trends have been observed in emerging markets, where volatility has increased, the US dollar has strengthened and several currencies have weakened.
The IMF is expected to provide a more comprehensive assessment of global, regional and country-level economic outlooks in its forthcoming World Economic Outlook report due in April.
On regional impacts, Kozack said preliminary assessments indicate weaker growth prospects for Gulf economies, although higher energy prices could partially offset declines in output depending on the pace at which exports recover.
She added that fiscal and external balances in the region may come under pressure, even as many Gulf Cooperation Council countries retain substantial policy buffers built up through recent reforms, diversification efforts and infrastructure improvements.
In Europe, she said the main transmission channel remains energy, given the region’s reliance on imports, while tighter financial conditions are also expected to weigh on economic performance.
Kozack noted that IMF staff have revised their assessment of how the conflict and elevated oil prices may affect the United States economy ahead of its Article IV consultation report.
Responding to concerns over rising US public debt, which has reached US39 trillion, she reiterated the IMF’s call for fiscal consolidation and a clear downward trajectory for government debt.
On monetary policy, she emphasised that central banks must remain vigilant to the inflationary consequences of higher energy prices, particularly any spillover into inflation expectations.
She added that the IMF continues to maintain close contact with member countries. While no formal requests for emergency financing have been received so far, she said the Fund stands ready to deploy its instruments to support economies as conditions evolve. - March 20, 2026
