West Asia war to push up inflation, slow global growth: IMF chief

The ongoing conflict in West Asia will drive up global prices and dampen economic growth, International Monetary Fund Managing Director Kristalina Georgieva warned, signalling an imminent downgrade to the global economic outlook.

In an interview with Reuters ahead of next week’s Spring Meetings of the International Monetary Fund and the World Bank in Washington, Georgieva said the war had triggered an unprecedented disruption in global energy supply, with ripple effects across inflation, trade, and food security.

“Instead, all roads now lead to higher prices and slower growth,” she said, underscoring the scale of the shock facing the global economy.

Oil shock and growth downgrade

The conflict has effectively choked energy flows through the Strait of Hormuz—a critical artery for nearly one-fifth of the world’s oil and gas trade—after Iran moved to block shipments following strikes by the United States and Israel in late February.

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As a result, global oil supply has shrunk by around 13 per cent, Georgieva said, pushing crude prices sharply higher and disrupting related supply chains, including fertilisers and industrial gases.

Benchmark Brent crude has surged to near $110 a barrel, with additional premiums for Middle East-linked cargoes, amplifying cost pressures for economies heavily reliant on energy imports.

The IMF, which had earlier projected global growth of 3.3 per cent in 2026 and 3.2 per cent in 2027, is now expected to cut those forecasts while raising its inflation outlook when it releases its latest World Economic Outlook on April 14.

Even if the war ends quickly, the Fund anticipates a “relatively small” downgrade to growth and an upward revision in inflation. A prolonged conflict, however, could significantly worsen both metrics.

Global uncertainty deepens

Georgieva said the crisis had added to an already fragile global backdrop marked by geopolitical tensions, climate shocks, demographic changes and rapid technological shifts.

“We are in a world of elevated uncertainty,” she said, cautioning policymakers to remain vigilant even after the immediate crisis subsides.

The war is expected to dominate discussions among global finance leaders at the upcoming Spring Meetings, where policymakers will assess the broader economic fallout and coordinate responses.

Poor nations face biggest risks

The IMF chief warned that the impact would be uneven, with poorer, energy-importing countries bearing the brunt of the shock. Around 85 per cent of IMF member countries are net energy importers, leaving them highly exposed to price spikes.

Many of these nations have limited fiscal capacity to cushion their populations, raising the risk of social unrest as fuel and food costs rise.

Some countries have already approached the IMF for financial assistance, Georgieva said, adding that the Fund may expand existing lending programmes to meet growing demand.

She cautioned against broad-based energy subsidies, arguing they could worsen inflationary pressures rather than alleviate them.

Energy infrastructure damage adds to strain

The conflict has also inflicted significant damage on energy infrastructure across the region. According to the International Energy Agency, at least 72 energy facilities have been hit, with about one-third sustaining major damage.

Even major exporters are not immune. Qatar, for instance, could take three to five years to restore about 17 per cent of its natural gas production following strikes on its facilities, Georgieva noted.

“Even if the war is to stop today, there would be a lingering negative impact to the rest of the world,” she said.

Food security concerns emerge

Beyond energy markets, the conflict is also raising concerns over food security. Disruptions to fertiliser shipments—many routed through the Strait of Hormuz—could eventually hit agricultural output if the war drags on.

The IMF is working with agencies such as the World Food Programme and the Food and Agriculture Organization to monitor risks.

While a full-blown food crisis has not yet materialised, Georgieva warned that prolonged disruptions could push millions towards hunger, particularly in vulnerable regions.