IMF warns Iran war could raise inflation and slow global growth
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The International Monetary Fund has warned that the conflict following US and Israeli attacks on Iran could push up inflation, weaken growth, and increase food prices around the world.
In a blog post published on Monday, the IMF said the impact would depend on how long the conflict lasts, how far it spreads, and whether it damages infrastructure and supply chains.
The IMF said a short conflict could cause a sharp rise in oil and gas prices before markets stabilise, while a prolonged war could keep energy costs high for an extended period.
“For fuel-importing economies, the effect is that of a large, sudden tax on income,” the IMF said. It added that higher fuel and electricity costs were already raising production expenses and reducing purchasing power in major Asian manufacturing economies.
The organisation warned that the conflict could also undermine recent economic recovery in many countries. It said sustained increases in energy and food prices would drive inflation higher and risk making inflation expectations more difficult to control.
The IMF also pointed to disruptions in trade and supply chains. It said around one-third of global fertiliser shipments pass through the Strait of Hormuz, which has been closed by Iran’s Revolutionary Guard. Disruption to those shipments could push up food prices worldwide.
Low-income countries are expected to be hit hardest because food accounts for a much larger share of household spending.
The IMF also warned of possible shortages of helium, widely used in semiconductors and medical devices, and sulphur needed by Indonesia to process nickel for electric vehicle batteries.