IMF warns global energy shock from Middle East tensions could fuel inflation and slow growth as oil prices surge above $100 per barrel

The International Monetary Fund (IMF) has warned that escalating tensions in the Middle East and the resulting spike in global energy prices could significantly fuel inflation and weaken economic growth worldwide.

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The IMF global energy inflation warning comes as crude oil prices surged above $100 per barrel, driven by disruptions to tanker traffic through the Strait of Hormuz, a key global shipping route for energy supplies.

Benchmark Brent crude and West Texas Intermediate have climbed above $105 per barrel, while Murban crude has exceeded $123, reflecting tightening supply conditions as shipping activity in the region remains heavily disrupted.

IMF spokesperson Julie Kozack said the ongoing conflict has already caused substantial interruptions to seaborne oil and natural gas flows, warning that the situation poses growing risks to global economic stability.

She noted that while no member country has formally requested emergency assistance, the IMF stands ready to intervene if needed, adding that the Fund is actively engaging policymakers and financial institutions to monitor developments closely.

According to Kozack, the economic impact will depend heavily on the duration and intensity of the crisis.

She cited IMF modelling which suggests that a sustained 10 per cent rise in energy prices over one year could increase global inflation by around 0.4 percentage points while reducing output by up to 0.2 per cent.

She further warned that prolonged oil prices above $100 per barrel could have “substantial consequences” for both inflation and global growth trajectories.

The IMF also stressed that central banks must remain alert to the risk of broader price pressures spreading beyond energy markets, particularly if inflation expectations begin to drift.

The IMF global energy inflation warning also highlighted potential vulnerabilities in the Gulf Cooperation Council economies, where growth prospects could weaken if oil and gas exports remain constrained.

The Fund said it is closely monitoring the unfolding situation following the escalation of conflict in late February, when strikes on Iranian targets triggered widespread regional instability and disrupted global energy flows.

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The IMF is expected to incorporate the economic impact of the crisis into its upcoming World Economic Outlook, due for release at the Spring Meetings in April.