ISTANBUL, March 20 — The International Monetary Fund (IMF) said yesterday that a sustained rise in energy prices stemming from the war in West Asia could push global inflation higher and weigh on economic output.
International Monetary Fund spokesperson Julie Kozack said the broader economic fallout would depend largely on how long and how intensely the conflict continues.
She said the Fund is tracking three main transmission channels: commodity prices, inflation and inflation expectations, and financial conditions.
Kozack noted that major disruptions are already visible. She said the closure of the Strait of Hormuz has cut access to 20 per cent of global oil supply and seaborne LNG flows, while damage to energy infrastructure in the Gulf and Iran has disrupted oil and gas production.
She said the impact on commodity prices will depend on the duration of the closure and the scale of damage to hydrocarbon production facilities in the region.
According to Kozack, oil and natural gas prices have climbed by more than 50 per cent in the past month, while disruptions to fertiliser shipments and broader transport bottlenecks are also raising the risk of higher food prices.
She said persistently high energy prices would raise headline inflation and could spill over into broader price pressures through so-called second-round effects, making inflation expectations a key area to monitor.
Kozack said historical patterns suggest that if a 10 per cent increase in oil prices persists through the rest of the year, global headline inflation could rise by about 40 basis points, while global output could decline by between 0.1 per cent and 0.2 per cent.
She also pointed to tightening financial conditions, noting that global stock markets have fallen while bond yields have risen across many economies, including the US, Britain and Europe. Similar trends are emerging in developing economies, where volatility has increased, the US dollar has strengthened and several currencies have weakened.
Kozack said the IMF will provide a broader update on global, regional and country-level outlooks in its World Economic Outlook report due in April.
On regional effects, she said initial IMF assessments point to weaker growth in Gulf economies.
While higher energy prices could partly or fully offset lower output in some countries, depending on how quickly exports resume, she said regional fiscal and external balances are likely to come under pressure.
She added that most Gulf Cooperation Council countries still have substantial policy buffers and have strengthened resilience in recent years through reforms, economic diversification efforts and logistics upgrades.
Kozack said energy remains the main transmission channel for Europe, given the region’s dependence on imports, while tighter financial conditions are also expected to weigh on the outlook.
She added that IMF staff have updated their assessment of how the conflict and higher oil prices could affect the US economy for the country’s Article IV consultation report.
Asked about US public debt reaching US39 trillion, Kozack reiterated the IMF’s call for Washington to reduce its fiscal deficit and place public debt on a firm downward path.
On monetary policy, she said central banks should remain alert to the inflationary implications of higher energy prices, especially any impact on inflation expectations.
Kozack also said the IMF remains in close contact with member countries. So far, no formal requests for emergency financing have been received, but the Fund stands ready to deploy its tools to support members as conditions evolve.
