The IMF has warned that the Middle East conflict has delivered a major global energy supply shock, driving up prices and weakening growth prospects. Managing Director Kristalina Georgieva said the turmoil amounts to a “large, global and asymmetric” negative supply shock, with oil flows down 13% and LNG shipments down 20%. She added that even the IMF’s most optimistic scenario now involves a downgrade to world growth, with lasting “scars” on the global economy from infrastructure damage, supply disruptions and loss of confidence.
The conflict-related shock is already rippling through refineries, transport and food markets, the IMF said, citing shortages of diesel and jet fuel that have disrupted trade and tourism, and new bottlenecks in moving fertilizer and grain. A further 45 million people have been pushed into food insecurity as a result of the escalation, taking the total number facing hunger to more than 360 million worldwide, according to the IMF.
The grim outlook comes as Washington and Tehran are expected to hold high-stake peace talks in Pakistan this weekend, after they agreed a two-week ceasefire late on Tuesday. Iran says any ceasefire must include Lebanon, which has been heavily bombarded by Israel this week. The scaled-up attacks, which killed hundreds and wounded more than 1,100, have raised concerns that the Iran ceasefire could be derailed.
