The war in the Middle East has triggered a global economic shock that will push up inflation and slow growth, the head of the International Monetary Fund (IMF) warned, as energy disruptions ripple through supply chains and financial markets ahead of updated forecasts.
In an interview with Reuters, IMF managing director Kristalina Georgieva said the conflict had already forced the Fund to abandon expectations of a modest upgrade to global growth, replacing it with a downgrade and a higher inflation outlook.
The IMF is set to release revised projections in its forthcoming World Economic Outlook on 14 April.
The warning reflects a rapid reassessment of global conditions following what the IMF describes as the largest disruption to energy supply in modern history.
Iran’s effective closure of the Strait of Hormuz - through which one-fifth of global oil and gas flows - has cut global oil supply by an estimated 13%, sending benchmark Brent crude prices towards US$110 a barrel and raising costs across transport, manufacturing and agriculture.
The IMF had previously projected global growth of 3.3% in 2026 and 3.2% in 2027, reflecting a gradual recovery from the pandemic and tightening monetary policy.
That baseline has now shifted. “All roads now lead to higher prices and slower growth,” Georgieva said.
The Fund outlined its concerns in a 30 March blog post, citing an “asymmetric shock” driven by energy disruption and tightening financial conditions.
Even under a scenario where hostilities end quickly, the IMF expects a downward revision to growth and an upward revision to inflation: A prolonged conflict would deepen both effects.
The supply shock extends beyond crude oil and liquefied natural gas.
Reduced energy flows are disrupting related industrial inputs including fertilisers and helium, amplifying cost pressures across sectors.
According to the International Energy Agency, at least 72 energy facilities have been damaged in the conflict, with around one-third suffering significant impairment.
The IMF said the economic impact is uneven, with energy-importing and lower-income countries facing the greatest risks.
An estimated 85% of IMF member states are net energy importers, many with limited fiscal capacity to offset rising costs.
Georgieva said several countries had already approached the IMF for financial assistance, although she did not identify them.
She cautioned against broad-based energy subsidies, arguing such measures risk fuelling inflation further and worsening fiscal pressures.
Countries without domestic energy reserves face rising import bills and reduced access to supply, particularly across parts of Africa and Asia.
The IMF warned that these pressures could heighten the risk of social unrest as governments struggle to shield households from price shocks.
Even energy exporters are not insulated, with Qatar estimating it will take between three and five years to restore around 17% of its natural gas production capacity following damage to infrastructure.
Beyond energy, the IMF is monitoring potential spill-overs into food systems.
Disruptions to fertiliser supply chains could constrain agricultural output if the conflict persists, increasing the risk of a broader food crisis.
The World Food Programme warned in March that millions could face acute hunger if the war continues into mid-year, while the IMF said it is coordinating with both the WFP and the UN’s Food and Agriculture Organization to track risks.
While Georgieva admitted a global food crisis has yet to materialise, she indicated the situation could deteriorate quickly if supply constraints intensify.
The IMF, alongside the World Bank and the IEA, are preparing a coordinated assessment of the war’s economic and energy impacts ahead of next week’s spring meetings in Washington, where finance ministers and central bank governors are expected to focus on the fallout.
“We are in a world of elevated uncertainty,” Georgieva said, pointing to geopolitical tensions, climate shocks and structural economic shifts.
“Even if the war stops today, there will be a lingering negative impact on the global economy.”
